A Practical Decision to Expense Small Capital Expenditures Rather Than

question 103

Multiple Choice

A practical decision to expense small capital expenditures rather than record them as property, plant, and equipment and depreciate them probably is made on the basis of the convention of

• A) conservatism.
• B) consistency.
• C) materiality.
• D) full disclosure.

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Definitions:

Relevant Cost

Costs that will be affected by a decision in the future and therefore should be considered in the decision-making process.

Direct Labor Cost

Expenses associated with the wages and benefits of employees who are directly involved in the manufacturing process.

Financial Advantage

The benefit obtained from making a particular financial decision, typically resulting in monetary gain or cost savings.

Outside Supplier

A third-party company or entity that provides goods or services to another company, external to the buying organization.