During the Current Year, Ivan Begins Construction of an Office

question 45

Multiple Choice

During the current year, Ivan begins construction of an office building and a hotel. He incurs $10,000 in property taxes during the construction of the office building and $15,000 for the hotel. Which of the following statements is true of the property taxes during the construction period?

• A) Ivan may elect to capitalize the property taxes for the properties in one year and then deduct the property taxes on the properties the next year.
• B) Ivan may elect to capitalize the property taxes on one of the properties while deducting the property taxes on the other for each year.
• C) Ivan must capitalize the property taxes on both properties each year if an election is made.
• D) Ivan must deduct the property taxes on both properties each year.

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Definitions:

Cost of Goods Sold

An accounting term referring to the direct costs attributable to the production of the goods sold in a company.

Gross Profit

The difference between sales revenue and the cost of goods sold, indicating the financial performance of a company's core business activities.

Tracking Inventory

The process of monitoring the quantity, location, and status of products available within a business to manage supply levels efficiently.

Merchandising Company

A business that purchases finished products and sells them to consumers without altering the form of the goods.