Capitalizing costs that should be expensed:
a. is a practice mostly found in large, well-established companies.
b. usually has no effect on net income.
c. has the effect of increasing net income by the same amount of the capitalized costs.
d. is a healthy practice if they written off shortly after the transaction takes place.
c
FEEDBACK: a. Incorrect.
b. Incorrect.
c. Correct. Capitalizing costs that should be expensed has the effect of increasing net income by the same amount of the capitalized costs, because expenses that should be deducted from revenues are not deducted until future periods when they are amortized.
d. Incorrect.
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