The decision whether to expense or capitalize expenditures for plant assets depends on many factors.Which of the following is NOT a factor for a company choosing to expense or capitalize an expenditure?
A)The decision of whether to expense or capitalize an expenditure is based on management's judgment.
B)The decision of whether to expense or capitalize an expenditure is influenced by cost-benefit and materiality tests.
C)The decision of whether to expense or capitalize an expenditure is not based on management's judgment since U.S.GAAP provides clear rules on specific types of assets.
D)The decision of whether to expense or capitalize an expenditure has the potential to cause ethical issues for companies.
E)The decision of whether to expense or capitalize an expenditure is influenced by the principle of conservatism causing accountants to expense an expenditure as opposed to capitalize it when faced with contradictory evidence.

Question

Quizplus · Accepted Answer

While management's judgment and cost-benefit/materiality tests are important factors in the decision to expense or capitalize an expenditure, U.S. GAAP does provide clear rules on specific types of assets. Therefore, choice C is not a factor in the decision-making process. Choices A, B, D, and E are all valid factors that can influence the decision to expense or capitalize an expenditure.

The Decision Whether to Expense or Capitalize Expenditures for Plant