If You Were Going to Expand a Facility by Adding

question 33

Multiple Choice

If you were going to expand a facility by adding 10% more seats, and the costs of providing ushers and other personnel to deal with the new seats was exactly the same (on a per seat basis) as the older portion of the facility, the new MC curve would look like the previous one except that it would

• A)no longer be a backward L but would be upward sloping once the old capacity was reached.
• B)just shift to the right.
• C)just shift to the left.
• D)just shift up.

Appreciate the importance and methods of depreciation and its impact on financial statements.

Recognize the significance of revenue recognition and its potential for fraud.

Understand the principles behind the time period assumption.

Develop the ability to correct financial statements based on omitted adjusting entries.

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Definitions:

Amortized

Refers to the process of gradually writing off the initial cost of an asset over a period.

Capitalized

Expenses or costs that are recorded as an asset on a balance sheet rather than an expense, to be amortized or depreciated over time.

Financial Lease

A financial lease is a lease agreement where the lessee assumes both the ownership risks and rewards of the leased asset, typically for its useful life.

Operating Lease

A lease agreement allowing the use of an asset without ownership, typically with lower monthly payments and shorter terms than a capital lease.