Which Statement Is True About a Company's Choice of Capitalization

question 112

Multiple Choice

Which statement is true about a company's choice of capitalization policy?

• A)All assets with a useful life of more than one year must be capitalized.
• B)The company's policy must meet the minimum capitalization amounts established by GAAP.
• C)The company's policy is usually determined relative to materiality.
• D)The company may elect to capitalize operating expenses which exceed the minimum threshold for asset capitalization.

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Definitions:

Liquidation

The process of closing a business, selling its assets to pay creditors, and distributing any remaining assets to the owners or shareholders.

Gains and Losses

Increases or decreases in equity from transactions and other events and circumstances affecting the entity, other than those relating to contributions from or distributions to equity participants.

Salary Allowances

Monetary benefits in addition to regular salary provided to employees, which may cover expenses such as housing, transportation, and medical expenses.

Partnership Net Income

The total profits earned by a partnership that are to be divided among partners in agreed-upon proportions.