Question

Which accounting concept justifies Rodriguez & Co. 's expensing of wastebaskets when purchased instead of capitalizing...

Which accounting concept justifies Rodriguez & Co. 's expensing of wastebaskets when purchased instead of capitalizing and depreciating the assets over their useful lives?

Matching

Going concern

Predictive value

Materiality
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Answer #1

Answer: Materiality

Eplanation: The wastebasket may have a useful life of more than one year but, it may still not be capitalised as the amount of depreciation per year maybe Immaterial for Rodriguez & Co.

For example, $500 might be immaterial for a large, profitable corporation, but it will be material or significant for a small company that has very little profit.

Therefore, the Co. uses the concept of Materiality while expensing the wastebasket when purchased instead of capitalising it and depreciating the asset over its useful life.

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