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

Which of the following costs is NOT recorded as part of the cost of a new building?

Construction labor and materials

Building permit fees

Architectural fees for the building design

Cost of land on which the building is constructed

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Verified step by step guidance

Understand the concept of capitalizing costs: In financial accounting, costs directly related to acquiring or constructing an asset, such as a building, are capitalized. This means they are recorded as part of the asset's cost on the balance sheet rather than being expensed immediately.

Identify costs directly related to the building: Construction labor and materials, building permit fees, and architectural fees are all directly related to the construction and design of the building. These costs are necessary to bring the building to its intended use and are therefore capitalized.

Differentiate the cost of land: The cost of land is treated separately from the cost of the building. Land is a distinct asset and is recorded as its own line item on the balance sheet. It is not included in the cost of the building because land is not depreciated, whereas buildings are subject to depreciation over time.

Review accounting treatment: Costs associated with the land, such as purchase price, legal fees, and site preparation, are recorded as part of the land asset. These costs are not included in the building asset because they pertain to the land itself.

Conclude the distinction: The cost of land on which the building is constructed is not recorded as part of the building's cost because it is classified as a separate asset. Only costs directly tied to the construction and preparation of the building are included in the building's cost.