What Is the General Principle for Capitalizing Costs to Property

question 59

Multiple Choice

What is the general principle for capitalizing costs to property, plant and equipment?

• A) All costs, which will provide a benefit beyond one year, are capitalized.
• B) Only depreciable costs are capitalized.
• C) All costs associated with the acquisition or construction of a plant asset are capitalized.
• D) All costs incurred to bring the item to its intended condition and location are capitalized.
• E) All costs relevant to the acquisition and long-term maintenance of a plant asset are capitalized.

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Definitions:

Average Costs

The total costs of production (fixed and variable) divided by the total quantity of output produced.

Central Planning Model

A system of economy where all choices regarding the creation and use of goods and services are made by the government.

American Capitalism

A system marked by private property, competitive markets, economic incentives, and limited government intervention in the economy.

Product Differentiation

The technique of identifying a product or service as unique in the market to boost its desirability to a chosen target demographic.