Harkin Company Purchased a Building on a Tract of Land

question 15

Multiple Choice

Harkin Company purchased a building on a tract of land and allocated the entire cost of the purchase to building.Normally,it depreciates buildings over 20 years using the straight-line method with zero residual value and does not depreciate land.Because of its accounting treatment of the purchase,Harkin's income before taxes for the next 20 years will be

• A)overstated.
• B)understated.
• C)unaffected.
• D)in conformance with GAAP.

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Definitions:

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