Expenditures That Maintain the Operating Efficiency and Expected Productive Life

question 187

Multiple Choice

Expenditures that maintain the operating efficiency and expected productive life of a long-lived asset are generally

• A) expensed when incurred.
• B) capitalized as a part of the cost of the asset.
• C) debited to the accumulated depreciation account.
• D) not recorded until they become material in amount.

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Definitions:

Flotation Costs

The costs associated with issuing new securities, including underwriting, legal, registration, and other expenses.

Securities

Investment assets that denote a shareholding in a publicly-listed company (stock), a bondholder’s claim against a corporation or government, or ownership rights as outlined in an option contract.

Project Costs

Project Costs include all expenses incurred during the execution of a project, including materials, labor, and overhead.

Subjective Approach

A method based on personal opinions, interpretations, points of view, emotions and judgment.