If a Company Using the Adjusted Sales Value Method to Assign

question 53

Multiple Choice

If a company using the adjusted sales value method to assign joint costs produces two products,A and B,from a joint process,and B requires additional processing after the split-off in order to be salable,how is the joint cost allocated to B determined?

• A)The costs of the additional processing are ignored in allocating joint costs.
• B)The costs of the additional processing are subtracted from the joint costs allocated to B.
• C)The relative sales value used to allocate the joint cost are determined after the costs of further processing are subtracted from the ultimate sales value of B.
• D)None of these are correct.

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Definitions:

Cash Surrender Value

Cash surrender value is the amount of cash that a life insurance policyholder can receive upon the cancellation of their policy before its maturity or the insured event.

Capital Lease

A lease agreement considered to have the economic characteristics of asset ownership, thus it is recorded as an asset and liability on the balance sheet.

Fair Market Value

An estimate of the market price of a property or asset if sold under competitive and open market conditions.

Marketable Securities

Financial instruments that can be easily converted into cash at market value, often used for short-term investments.