The Use of Acquisition Cost Less Depreciation in Valuing an Asset

question 8

Multiple Choice

The use of acquisition cost less depreciation in valuing an asset on the balance sheet is the logical result of the _ accounting convention.

• A) cost benefit
• B) materiality
• C) conservatism
• D) continuity

---

Definitions:

Conversion Costs

The combined costs of direct labor and manufacturing overhead involved in transforming materials into finished products.

Prime Costs

The combined costs of direct material and direct labor required to produce a good.

Conversion Costs

Costs incurred to convert raw materials into finished goods, including direct labor and manufacturing overhead.

Prime Costs

The combination of direct materials and direct labor costs that are directly attributable to the production of goods.