A Company Purchases a Remote Site Building for Computer Operations

question 101

Multiple Choice

A company purchases a remote site building for computer operations. The building will be suitable for operations after some expenditures. The wiring must be replaced to computer specifications. The roof is leaky and must be replaced. All rooms must be repainted and recarpeted and there will also be some plumbing work done. Which of the following statements is true?

• A) The cost of the building will not include the repainting and recarpeting costs.
• B) The cost of the building will include the cost of replacing the roof.
• C) The cost of the building is the purchase price of the building while the additional expenditures are all capitalized as Building Improvements.
• D) The wiring is part of the computer costs not the building cost.

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Definitions:

Direct Write Off Method

An accounting practice where uncollectable accounts receivable are directly removed from the books when deemed uncollectible.

Direct Write-off Method

An accounting practice where uncollectible accounts receivable are directly written off against income at the time they are deemed unrecoverable.

General Journal

The general journal is an accounting ledger in which all types of transactions are initially recorded before they are posted to specific accounts in the general ledger.

Direct Write Off Method

An accounting method where uncollectible accounts receivable are written off directly against income at the time they are deemed uncollectible.