Unlimited Appliances Corporation, a retailer, sells home appliances.Its gross receipts for the last 10 years have averaged just over $1 million.The corporation must capitalize the costs of direct material and direct labor but may expense any indirect costs.

Question

Quizplus · Accepted Answer

According to generally accepted accounting principles (GAAP), direct material and direct labor costs must be capitalized as inventory costs until the product is sold. Indirect costs, such as overhead, can be expensed as incurred.

Unlimited Appliances Corporation, a Retailer, Sells Home Appliances