Which of the following would be considered a capital expenditure? (A 22) O Making a payment on accounts payable O Paying accumulated income taxes O Paying shipping insurance on new equipment Retiring a bond payable taken out for construction

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Which of the following would be considered a capital expenditure? (A 22) O Making a payment on accounts payable O Paying accumulated income taxes O Paying shipping insurance on new equipment Retiring a bond payable taken out for construction Which of the following costs CANNOT be capitalized as part of land? Price paid to purchase the land. Clearing old buildings and other obstructions Obligations assumed when buying the land Overhead costs for construction projects on the land

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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Smatter Corporation purchased land for a new building. Which of the following costs would not be included in the cost of the land? a. Purchase price of the land b. Cost of demolishing an old garage located on the land c. Cost of a new parking lot constructed on the lane d. Brokerage commission paid to the real estate agent who handled the land transaction
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