Question

Which of the following costs are capitalized for self-constructed assets?

a. Materials and labor only
b. Labor and overhead only
c. Materials and overhead only
d. Materials, labor, and overhead

Answer 1

The costs that are capitalized for self-constructed assets are materials, labor, and overhead.

Step-by-step explanation:

The costs that are capitalized for self-constructed assets are materials, labor, and overhead. When a company constructs its own assets, such as buildings or machinery, it can capitalize the costs incurred in the construction process. This means that instead of expensing these costs immediately, they are recorded as an asset on the company's balance sheet and amortized or depreciated over the useful life of the asset.

For example, if a company constructs a new building, the costs of the materials used in the construction, the labor involved in the construction process, and the overhead costs related to the construction activities - such as equipment rental and utilities - can be capitalized.