Answer
a.i.This option requires the application of the matching principle. Costs incurred will be matched to the houses (the products in this case).
a.ii.This option requires costs to be allocated to the specific periods they were incurred. Allocating the costs will result in the timely preparation of financial reports for every period.
b. The shell houses should be based on the "passage of time." This option is ideal because shell houses have a useful life of up to seven years. Therefore, once a shell house has been installed, it is expected to generate revenue for a duration of between three and seven years.
Work Step by Step
N/A
