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:

Contribution Margin

The difference between sales revenue and variable costs of production, indicating how much revenue contributes to fixed costs and profit.

Constrained Resource

A limiting factor that restricts a company's ability to produce or perform at its maximum capability.

Split-off Point

The split-off point in production is the stage at which multiple products are derived from a common process and can be identified or measured separately.

Joint Products

Two or more products that are generated from a common input or production process, where the costs before the split-off point are shared.