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:

Fixed Expenses

Costs that do not change with the level of production or sales activities, such as rent or salaries.

Budgeted Sales

Projected sales volume or revenue for a specific period, used for planning and performance assessment purposes.

Cash Disbursements

Payments made in cash or cash equivalents, often tracked in a ledger to manage cash flow.

Selling and Administrative Expense Budget

A detailed plan outlining the expected selling and administrative expenses for a specific period, usually contributing to the master budget.