ExpertHard1 markMultiple Choice
CPA · Question 43 · Area III: Property Transactions
Under the Uniform Capitalization Rules (UNICAP) of IRC §263A, which of the following costs must be capitalized into inventory?
Under the Uniform Capitalization Rules (UNICAP) of IRC §263A, which of the following costs must be capitalized into inventory?
Answer options:
A.
Marketing and selling expenses.
B.
Research and development.
C.
General management salaries.
D.
Warehousing and storage costs.
How to approach this question
Distinguish between production/storage costs (Capitalize) and selling/general admin costs (Expense).
Full Answer
D.Warehousing and storage costs.✓ Correct
D
UNICAP requires capitalization of direct materials, direct labor, and applicable indirect costs (overhead) related to production or resale. Warehousing/storage is an indirect cost that must be capitalized. Marketing, R&D, and general management are period expenses.
Common mistakes
Expensing warehousing costs.
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