During 2015 and 2016,Danny Pays Property Taxes of $3,500 Each

question 54

Multiple Choice

During 2015 and 2016,Danny pays property taxes of $3,500 each year on a piece of land.During 2015,the land is vacant and unproductive.In 2016,Danny uses the land as a parking lot and generates $16,000 in income.Which of the following is true regarding the property taxes?

• A)Capitalize $3,500 each year.
• B)Deduct $3,500 each year.
• C)Capitalize $3,500 in 2015 and deduct $3,500 in 2016.
• D)Either B or C is acceptable.

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Definitions:

Standard Quantity

The expected or predetermined amount of materials or input needed to produce a single unit of product, used for manufacturing budgeting and variance analysis.

Standard Price

A predetermined cost that companies use for budgeting and assessing the performance of actual costs.

Actual Materials Purchased

The total quantity and cost of raw materials bought during a period for the purpose of production.

Labour Rate Variance

The difference between the actual cost of labor and the standard or expected cost.