Tim's Tams donated 100 baseball caps to the local homeless shelter.The company will record the donation as an operating expense.The caps cost Tim's Tams $2.00 each and the company usually sells them for $8.50.If Tim's Tams reports a charity expense of $850,this accounting choice would be considered ________.

Question

Quizplus · Accepted Answer

The company is recording the donation at the cost of the caps, which is $2.00 each. This is a conservative accounting choice because it results in a lower reported expense than if the company had recorded the donation at the selling price of the caps, which is $8.50 each.

Tim's Tams Donated 100 Baseball Caps to the Local Homeless