a A company spends 20 million dollars for an office building

a) A company spends $20 million dollars for an office building. Over what period should the cost be written off?

               When the $20 million is expended in cash.

               All in the first year.

               Over the useful life of the building.

               After $20 million in revenue is recognized.

b) An accounting time period that is one year in length, but does not begin on January 1, is referred to as

               a reporting period.

               the time period assumption.

               an interim period.

               a fiscal year.

c) A bakery shop makes a large sale for $1,400 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The bakery shop follows GAAP and applies the revenue recognition principle. When is the $1,400 considered to be recognized?

               November 30.

               December 1.

               December 5.

               December 10.

Solution

Answer

According to the IRS, Life of the Asset is to be written-off over its useful life.

Fiscal year is of one year and it starts from April 1 to 31 March.

According to Revenue Recognition principle, A revenue is considered revenue when it happens and in our case the sales in made on November 30, so $1,400 is considered Revenue on November 30.