Why Would a Company Recognize the Cost of an Asset

question 27

Multiple Choice

Why would a company recognize the cost of an asset on its balance sheet rather than treat it as an expense on the date it is acquired?

• A)Conservatism requires this recognition.
• B)Matching requires costs to be matched against the related revenues of the asset.
• C)Strictly to record the amount in the most economically favorable manner possible for the company.
• D)The stable dollar concept will not allow inflation to be added to expenses, but does allow inflation to be added to assets.

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Definitions:

Sources of Law

The origins from which laws are derived, including constitutions, statutes, regulations, and court decisions.

Sales Contracts

Legal agreements that define the terms of sale of goods or services from a seller to a buyer.

Uniform Commercial Code

A comprehensive set of laws governing commercial transactions in the United States, designed to standardize laws across states and simplify the legal aspects of buying and selling goods.

Ex-Ship

A shipping term indicating the seller's responsibility ends when the goods are made available to the buyer on board the ship at the destination port.