Consider the following statements about absorption- and variable-costing income: I.Yearly income reported under absorption costing will differ from income reported under variable costing if production and sales volumes differ.II.In the long-run, total income reported under absorption costing will often be close to that reported under variable costing.III.Differences in income under absorption and variable costing can often be reconciled by multiplying the change in inventory (in units) by the variable manufacturing overhead cost per unit.Which of the above statements is (are) true?
A. I only.
B. II only.
C. III only.
D. I and II.
E. II and III.
Answer: D
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Klapper Company claimed a tax deduction which was uncertain when it was deducted in 2018 but is relatively certain of receiving the deduction over a five-year period. Which of the following is not correct in accounting for the uncertain tax item?
A. The contingency reserve is reduced each year with the offset to the deferred tax account. B. As the company will ultimately get 100% of the deduction, no contingency reserve is required. C. A contingency reserve will be set up at the same amount as the deferred tax asset if the firm is certain it may claim 100% of the deduction over time. D. Income tax expense in the first year is the current portion of income tax expense minus the increase in the deferred tax asset.
Buyer contracts to buy an automobile from seller (an individual who is not a car dealer) for
$1,000. The buyer fails to accept and pay for this car, so the seller sells it to another party for $1,200. This second sale cost the seller an extra $50 in advertising. Seller sues the buyer for damages for breach of contract. In this situation: A) Seller can collect $250. B) Seller can collect $50. C) Seller can collect $200. D) Seller collects nothing, but keeps the extra amount received. E) Seller collects nothing, but must give buyer the extra $150.
Which of the following methods accounts for 100% of the services that occur between service departments?
A. Reciprocal method. B. Dual-cost allocation method. C. Indirect method. D. Step-down method. E. Direct method.
Formal rule making differs from informal rule making in: A) public notice is required for formal rule making not informal
B) a public comment period is needed for formal rule making but not informal. C) no modification period exists in formal rule making. D) None of the above