Expensing the Cost of a Pencil Holder That Cost $1

question 9

Multiple Choice

Expensing the cost of a pencil holder that cost $1.25 instead of capitalizing it as a plant asset and depreciating it over its estimated useful life of 10 years:

• A)violates the economic entity assumption.
• B)violates GAAP since pencil holders are important assets.
• C)is justified because of materiality.
• D)is appropriate because of the stable dollar assumption.