Question

suppose smart touch learning purchased a building. the purchase price would be included in the cost of the building renovations to get the building ready for its intended use would be considered expenses on the income statement

Answer 1

Smart Touch Learning's building purchase price is recorded as a fixed asset and renovations are capitalized, not expensed, on the income statement.

Step-by-step explanation:

When Smart Touch Learning purchases a building, the purchase price is indeed included in the cost of that building on the company's balance sheet as part of its fixed assets. However, any renovations to prepare the building for its intended use also form part of the asset's capital cost, rather than being treated as an expense in the period they were incurred. This is because these renovations are likely to provide benefit over several accounting periods.

Over time, both the building and its improvements will be subject to depreciation, which will then be recorded as an expense on the income statement.