A company spends $15 million dollars for an office building.Over what period should the cost be charged to expense?

Question

Quizplus · Accepted Answer

The cost of the building should be charged to expense over the useful life of the building. This is in accordance with the matching principle, which requires expenses to be matched with the revenues they help generate. Since the building will be used for many years, it makes sense to spread the cost over its useful life rather than recognizing it all in the first year or waiting until $15 million in revenue is recognized.

A Company Spends $15 Million Dollars for an Office Building