Oakland Corp

question 152

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) because part of the purchase involved land, record all of the cost in the Land account.
• 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:

Administrative Expenses

Costs related to the general administration of a business, such as salaries of executive personnel, accounting, and human resources.

Net Operating Income

A measure of a company's profitability calculated as total revenue minus operating expenses, excluding interest and taxes.

Contribution Approach

A method of income statement presentation that separates fixed costs from variable costs, facilitating operational decision-making.

Cost Formula

An equation used to predict costs at different levels of activity. It often incorporates fixed costs, variable rate per unit of activity, and the total cost.