A Prefabricated Steel Storage Shed Is Purchased for $20,000 Cash

question 110

Multiple Choice

A prefabricated steel storage shed is purchased for $20,000 cash and a $80,000 interest-bearing note payable over a 5-year period at an annual interest rate of 10 percent per annum.The cost to be recorded as an asset (in addition to the $100,000 purchase price) should include all of the following except

• A)shipping and handling charges.
• B)insurance while in transit.
• C)interest on the note payable.
• D)reassembly and installation costs.
• E)All of these answer choices are costs to be recorded as assets.

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Definitions:

Deferred Tax Assets

Financial items on a company's balance sheet that can be used to reduce future tax liability.

Deferred Tax Liabilities

Future tax liabilities arising from temporary differences between the book value and the tax basis of assets and liabilities.

Book Income Tax Expense

The amount of income tax expense that is reported in the financial statements, which may differ from actual taxes paid due to timing or differences in accounting and tax rules.

Deferred Tax Assets

Financial items on a company's balance sheet representing taxes paid or carried forward but not yet realized in the income statement.