GAAP Stipulates That Firms Should Do What with Expenditures That

question 86

Multiple Choice

GAAP stipulates that firms should do what with expenditures that increase the service potential of an asset beyond that originally anticipated?

• A) Expense the expenditure immediately.
• B) Capitalize the expenditure and depreciate it over the remaining service life of the asset.
• C) Capitalize the expenditure, but do not depreciate the asset.
• D) Charge it off to shareholders' equity.

---

Definitions:

Pure Monopolist

A single seller in a market who has the power to control market prices and output without any competition.

Unregulated Monopoly

A market structure where a single seller controls the entire market for a product or service, with no governmental restrictions in place.

Pure Competition

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information.

Profit-maximizing

A company's goal to achieve the highest possible profit where the marginal cost of production is equal to the marginal revenue from sales.