Question
6. For each of the following situations decide whether the expenditure should be recognized as an asset or as an expense and explain why. Assume
6. For each of the following situations decide whether the expenditure should be recognized as an asset or as an expense and explain why. Assume that all amounts are material to the company.
a. Legal fees paid in connection with the purchase of land totaled $25,000.
Recognize as an asset or an expense: _________________________________________________
Rationale: ______________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
b. A company paves the driveway leading to the office building at a cost of $32,000.
Recognize as an asset or an expense: _________________________________________________
Rationale: ______________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
c. A company purchases a machine at a cost of $47,000.
Recognize as an asset or an expense: _________________________________________________
Rationale: ______________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
d. On February 1, 2017, partnership pays 6 months of office rent to cover February and the subsequent 5 months.
Recognize as an asset or an expense: _________________________________________________
Rationale: ______________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
e. A company pays $120,000 wages to employees for construction on a building to be used in their own business.
Recognize as an asset or an expense: _________________________________________________
Rationale: ______________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
f. A company pays wages of $5,000 for the month to an employee who serves as the driver of their long-haul delivery truck.
Recognize as an asset or an expense: _________________________________________________
Rationale: ______________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
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