Which of the Following Is a Typical Problem That Sometimes

question 4

Multiple Choice

Which of the following is a typical problem that sometimes occurs in classifying an expenditure as capital or current?

• A) What is a large expenditure to a small government may be a small expenditure to a large government.
• B) Many items purchased by governments may be used for many years, but are not costly enough to make the accounting expense of including them in a capital budget worthwhile.
• C) Sometimes an expenditure to repair a capital asset may replace the capital asset damaged, such as in a storm, but may not extend the life of that asset beyond what it would have lasted before the damage occurred.
• D) All of these are correct.
• E) None of these is correct.

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Definitions:

GAAP Requirements

The set of standardized guidelines and principles designed for financial accounting, used to ensure consistency, clarity, and comparability of financial statements.

Impairment Losses

Losses recognized when the carrying amount of an asset exceeds its recoverable amount.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) for the preparation of public company financial statements on a global basis.

GAAP

A series of standard accounting protocols and measures adopted broadly for financial statement compilation.