When Deciding Whether to Expense or Capitalize the Costs Incurred

question 39

Multiple Choice

When deciding whether to expense or capitalize the costs incurred when acquiring a capital asset, which one of the following is not relevant to the decision?

• A)Materiality criterion
• B)Matching principle
• C)Income tax rules
• D)Revenue recognition principles

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Definitions:

Price-Earnings Ratio

A financial indicator that evaluates the relationship between a company’s current stock price and its earnings per share.

Market Price

The current price at which an asset or service can be bought or sold in a market.

Dividend Payout Ratio

The proportion of earnings paid out as dividends to shareholders, expressed as a percentage of the company's net income.

Dividends

Payments made by a corporation to its shareholder members, typically out of the company's profits.