Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

Vicious Cycle built a new building. Which of the following costs should be expensed rather than capitalized?

Cost of building permits

Routine maintenance costs incurred after the building is completed

Legal fees to obtain title to the land

Architect fees paid during the construction of the building

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Verified step by step guidance

Understand the difference between capitalizing and expensing costs. Capitalizing means recording a cost as an asset on the balance sheet, which will be depreciated over time. Expensing means recording the cost as an expense on the income statement in the period it is incurred.

Identify costs that are directly related to acquiring or constructing the building. These costs, such as building permits, legal fees to obtain title to the land, and architect fees during construction, are typically capitalized because they contribute to the creation of the asset.

Recognize costs that are incurred after the building is completed and are not directly related to its acquisition or construction. Routine maintenance costs fall into this category because they are recurring expenses necessary to maintain the building's functionality, not to enhance its value or extend its useful life.

Apply the principle that costs incurred to maintain an asset after it is operational are expensed, while costs that enhance the asset or prepare it for use are capitalized.

Conclude that routine maintenance costs incurred after the building is completed should be expensed, while the other costs listed (building permits, legal fees, and architect fees) should be capitalized as part of the building's cost.