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How many of the following transactions would be capitalized? a. Purchase building by signing a long-term...

How many of the following transactions would be capitalized? a. Purchase building by signing a long-term note b. Purchase three-year insurance policy in advance c. Pay dividends to stockholders d. Pay utilities for operating a building

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Answer #1

a)

Purchasing building through a long-term note will result in capitalizing building and recording a long term liability in the form of note payable

b)

Purchase three-year insurance policy in advance will result in recording prepaid insurance as current assets

c)

Paying dividends will result in cash outflow and reduction in reserves of the company

d)

Paying utilities will result in increase in expenses

So, as per above discussion, option a is the correct option

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