Which of the Following Statements Regarding Capitalization Is Correct

question 83

Multiple Choice

Which of the following statements regarding capitalization is correct?

• A)Capitalizing costs refers to the process of converting assets to expenses.
• B)All costs incurred to acquire an asset may be capitalized.
• C)Capitalizing a cost means to record it as an asset.
• D)Capitalization results in an immediate decrease in net income.

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Definitions:

Price-Earnings Ratio

A valuation metric for a company, calculated as its current share price divided by its per-share earnings.

Market Price per Share

The current price at which a company's shares are being traded on the stock market.

Unusual Items

Financial events that are not typical for the normal business operations and are unlikely to recur, affecting a company's financial statements.

Accounting Principles

Fundamental guidelines or rules that underpin the process of accounting, including concepts like the matching principle, revenue recognition, and historical cost.