Under the cost principle,a company capitalizes:
A)all ordinary repair expenditures incurred in the use of an asset.
B)any interest incurred in borrowing money to help pay for asset acquisitions.
C)all reasonable and necessary costs of acquiring an asset and preparing it for use.
D)the total market value of individual assets acquired in a 'basket purchase.'

Question

Quizplus · Accepted Answer

The general rule for tangible assets under the cost principle is that all reasonable and necessary costs to acquire and prepare an asset for use should be recorded as a cost of the asset.Interest on loans to purchase fixed assets is expensed as incurred.Because ordinary repairs occur frequently to maintain the asset's productive capacity for a short time,they are recorded as expenses in the current period.When a "basket purchase" occurs,the total cost (rather than the total market value)is split among the assets in proportion to the market value of the assets as a whole.

Under the Cost Principle,a Company Capitalizes