When Using the Modified Approach to Account for Infrastructures, Expenditures

question 142

Multiple Choice

When using the modified approach to account for infrastructures, expenditures to extend the life of the infrastructure assets are:

• A) Expensed.
• B) Capitalized.
• C) Either A or B.
• D) Neither A nor B.

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Definitions:

Increase in Assets

An upward adjustment or growth in the value of resources controlled by a company that are expected to bring future economic benefits.

Decrease in Liabilities

A reduction in the total amount of obligations (debts or dues) that a company owes to creditors or third parties.

Stockholders' Equity

The stake of shareholders in a corporation, determined by subtracting liabilities from the total assets' value.

Debit and Credit Logic

The foundational concept of accounting that uses debits and credits to record changes in accounts, where debits increase assets or decrease liabilities and equity, and credits decrease assets or increase liabilities and equity.