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:

Inventory Cost

The total cost associated with acquiring goods for sale, including purchase price, taxes, and shipping.

Interchangeable

Items that are so similar in nature that they can be swapped or substituted for one another without affecting function or value, important in inventory management and manufacturing.

Goods Available

The total quantity of goods on hand at any time, including both inventory that is ready for sale and materials that will be used to produce goods.

Cost Of Goods

The total expense associated with producing goods, including raw materials and labor costs.