If a Company Capitalizes a Cost That Should Have Been

question 135

Multiple Choice

If a company capitalizes a cost that should have been expensed:

• A)expenses and net income will be overstated in the year of the error.
• B)expenses and net income will be understated in the year of the error.
• C)expenses will be overstated and net income will be understated in the year of the error.
• D)expenses will be understated and net income will be overstated in the year of the error.

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Definitions:

Subsidized Rate

A reduced interest rate on loans provided by the government or other institutions to support specific groups or activities.

Productivity

The measure of how efficiently goods and services are produced, often evaluated as output per unit of input.

Standard Of Living

The level of wealth, comfort, material goods, and necessities available to a person, family, or group in a society.

Long Run

A period sufficient for all adjustments to be made, including prices, wages, and resource allocations, in response to economic conditions.