Which of the following statements is true about the full-costing method?
A) The cost of a dry well would be written off immediately as a loss.
B) All costs are recorded as assets,and then depleted over the resource's useful life.
C) All costs are written off immediately as a loss.
D) All costs are recorded as assets,but remain on the books as assets.

Question

Quizplus · Accepted Answer

The full-costing method considers all costs associated with the production of a product or service, and records them as assets on the balance sheet. These assets are then depleted over the resource's useful life, which results in a lower cost of goods sold and potentially higher profits. This method is commonly used in the oil and gas industry, where assets such as wells have a long useful life and high upfront costs. Option A is incorrect because a dry well would not be considered an asset and would not be recorded on the balance sheet. Option C is incorrect because all costs would not be written off immediately as a loss. Option D is incorrect because assets are not meant to remain on the books forever - they are gradually depleted over time.

Which of the Following Statements Is True About the Full-Costing