When a Second-Hand Building Is Purchased Which of the Following

question 59

Multiple Choice

When a second-hand building is purchased which of the following should be recognised in a separate asset account instead of being debited to the building account?

• A) Legal fees for the purchase of the building
• B) Expenditure on initial repairs to the floor of the building
• C) Stamp duty paid on the building purchase
• D) The cost of installing an air conditioning system

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Definitions:

Marginal Costs

The cost of producing one additional unit of a good or service.

Profit-Maximizing

The process by which a company determines the price and output level that returns the greatest profit.

Long Run

A period in economics where all factors of production and costs are variable, allowing for full adjustment to changes.

ATC

Average Total Cost; the per unit cost of production, calculated by dividing the total cost by the quantity produced.