During the Current Year,Ivan Begins Construction of an Office Building

question 28

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

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Definitions:

Production Budget

An estimate of the total amount of production, in units, that a company needs to meet its sales goals and inventory policies.

Master Budget

A number of separate but interdependent budgets that formally lay out the company’s sales, production, and financial goals and that culminates in a cash budget, budgeted income statement, and budgeted balance sheet.

Interdependent Budgets

Budgets within an organization that are related and influenced by one another, requiring coordination for effective financial planning.

Units Produced

A measure of output from a production process, indicating the total number of complete units manufactured during a given period.