Aspen stores is a large retail chain. The company has four warehouses that are located in various parts of the country. The goods are stored at the warehouses and then moved to the retail stores for sale.
A)The costs of operating the warehouses can be deducted in the year the costs are incurred because it is a loss incurred from not selling goods.
B)The costs of operating the warehouses can be deducted in the year the costs are incurred because they did not add to the value of the goods.
C)The costs of operating the warehouses can be capitalized or expensed by electing one method or the other.
D)The warehouses are on-sight storage facilities and, therefore, their costs must be added to the cost of goods on hand.
E)None of the above.

Question

Quizplus · Accepted Answer

The costs of operating warehouses are typically considered operating expenses and are deducted in the year they are incurred, but not for the reasons stated in A or B. They are not capitalized as in C, nor are they added to the cost of goods as in D.

Aspen Stores Is a Large Retail Chain