Which of the Following Is Not an Accurate Statement Regarding

question 26

Multiple Choice

Which of the following is not an accurate statement regarding the distinction between debt and equity?

• A)Only equity is considered a source of financing for operations of the business,since debt must be repaid at a specified maturity date.
• B)If a business ceases operations and liquidates,claims of all creditors have legal priority over claims of the stockholders.
• C)Most debt requires the borrower to pay interest;equity financing does not obligate the company to make a specified payment.
• D)The providers of equity are owners of the business;the providers of borrowed funds are creditors.

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Definitions:

Absorption Costing

A method of product costing that includes all manufacturing costs, both variable and fixed, in the cost of a product.

Manufacturing Costs

Expenses directly associated with the production of goods, including direct materials, direct labor, and manufacturing overhead.

Income

The money received by an entity in return for its goods or services, or through investments.

Absorption Costing

A cost accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.