A negative consequence of recording byproducts in the accounting records when the sale occurs is that:
A)the revenue from the byproducts is usually fairly large, and the accounting records will be distorted
B)managers can time earnings by their decision when to sell byproducts
C)managers have an incentive to stockpile byproducts
D)Both B and C are correct.

Question

Quizplus · Accepted Answer

Both options B and C are correct. If byproducts are recorded in the accounting records at the time of sale, managers can manipulate earnings by timing the sale of byproducts. Additionally, managers may be incentivized to accumulate byproducts to increase revenue in future periods.

A Negative Consequence of Recording Byproducts in the Accounting Records