Oakland Corp

question 49

Multiple Choice

Oakland Corp.purchased land and a building for a combined cost of $500,000.Oakland must

• A)record the $500,000 acquisition cost in an account called Land and Buildings.
• B)depreciate the $500,000 acquisition cost,less any residual value,over the expected useful life of the building.
• C)record all of the cost in the Land account because part of the purchase involved land.
• D)allocate the $500,000 acquisition cost to separate Land and Buildings accounts based on their respective fair market values.

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Definitions:

Net Method

An accounting method where discounts for early payment are assumed to be taken and purchase discounts are deducted from the cost of purchases.

Recording Purchases

The process of documenting the acquisition of goods or services in the financial records of an entity, impacting its inventory or expense accounts.

Periodic Inventory System

An accounting method that updates inventory levels and cost of goods sold at the end of an accounting period, not continuously.

Merchandise Inventory

The goods or products that a retailer or wholesaler intends to sell to customers for a profit.