When Certain Kinds of Assets Are Built That Require Public

question 37

Multiple Choice

When certain kinds of assets are built that require public welfare and safety expenditures at the end of the asset's life: 

• A) these asset retirement costs are expensed when asset retirement occurs.
• B) a liability simultaneously arises.
• C) these estimated future expenditures are added to the carrying value of the asset.
• D) this fact is only reported in the financial statement footnotes.

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Definitions:

Common Shares

Shares of stock in a company that entitle the holder to dividends and voting rights in shareholder meetings.

Acquisition Differential

The difference between the purchase price of an acquired company and the sum of its net assets' fair values.

Retained Earnings

The portion of a company's profit not distributed to shareholders as dividends but kept in the company to reinvest in its core business or to pay debt.

Cost Method

An accounting approach for investments, outlining that an investment is recorded at its acquisition cost, adjusting for any dividends received.