Question

Which of the following is true of expired costs?

a. Expired costs are added to revenue to determine income on the income statement.
b. Expired costs are reported as fixed assets on a company's balance sheet.
c. Expired costs are recognized as liabilities on the balance sheet.
d. Expired costs are used up in the production of revenue.

Answer 1

The true statement about expired costs is that they are used up in the production of revenue, and are recorded as expenses in the income statement.

Step-by-step explanation:

Among the options provided, the statement that is true of expired costs is that expired costs are used up in the production of revenue. Expired costs relate to consumed or used assets or services in generating revenue within a particular accounting period.

These costs are recognized on the income statement as expenses, not on the balance sheet as assets or liabilities. In the context of fixed and variable costs, expired costs can include examples such as the rent for a retail space or factory, which are fixed because they do not fluctuate with the level of production.