ExpertHard1 markMultiple Choice
CPA · Question 41 · 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.
Off-site storage and warehousing costs.
How to approach this question
UNICAP requires capitalizing Direct Materials, Direct Labor, and Overhead (Factory). Warehousing is part of the 'Factory/Production' process. Selling/Marketing/R&D are 'Period' costs.
Full Answer
D.Off-site storage and warehousing costs.✓ Correct
D
IRC §263A requires capitalization of direct costs and an allocable share of indirect costs (overhead) associated with production or resale. This includes off-site storage, warehousing, purchasing, handling, and processing costs. Selling, advertising, and general management are period costs.
Common mistakes
Thinking storage is a selling expense.
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