By-product costing that uses the asset recognition method(s) creates:
A)Expense recognition in the current period.
B)A distortion of net income.
C)An adjustment on the income statement.
D)An inventory value in the period in which the by-products are produced.
E)A result that is not compatible with GAAP.

Question

Quizplus · Accepted Answer

By-product costing that uses the asset recognition method creates an inventory value in the period in which the by-products are produced. This method recognizes the value of by-products as an offset to the cost of the main product, and thus, it is compatible with GAAP. The other options are incorrect because by-product costing using this method does not distort net income, require an adjustment on the income statement, or create an expense recognition in the current period.

By-Product Costing That Uses the Asset Recognition Method(s) Creates