Capitalizing an Expenditure Rather Than Recording It as a Revenue

question 183

Multiple Choice

Capitalizing an expenditure rather than recording it as a revenue expenditure

• A)affects the amount of net income reported during an accounting period,but has no effect on the total book value of plant assets on the balance sheet.
• B)affects the total book value of plant assets on the balance sheet,but has no effect on the amount of net income reported during an accounting period.
• C)affects the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period.
• D)has no effect on the book value of plant assets on the balance sheet or the amount of income reported on the income statement.

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Definitions:

Average Variable Cost

The total variable costs divided by the quantity of output produced, showing the variable cost per unit of output.

Economic Loss

A situation where total costs exceed total revenues, resulting in a negative profit for a business.

Short-run Supply Curve

Shows the relationship between the price of a good and the quantity supplied over a short period, when at least one input is fixed.

Minimum Point

The point at which a function reaches its smallest value, often used in the context of costs or optimization problems.