A company spends $2 million dollars to build a restaurant.Over what period should the cost be written off?

Question

Quizplus · Accepted Answer

The cost of the restaurant should be written off over the useful life of the building, as this represents the period of time over which the company will benefit from the investment. Writing off the cost all in the first year (B) or only after $2 million in revenue is earned (D) are not appropriate methods of accounting. Additionally, the fact that the cost was expended in cash (A) does not determine the appropriate period over which to write off the cost.

A Company Spends $2 Million Dollars to Build a Restaurant