On January 1, year 1, Brecon Co. installed cabinets to display its merchandise in customers’ stores. Brecon expects to use these cabinets for five years. Brecon’s year 1 multistep income statement should include

On January 1, year 1, Brecon Co. installed cabinets to display its merchandise in customers’ stores. Brecon expects to use these cabinets for five years. Brecon’s year 1 multistep income statement should include

In year 1, Brecon Co. would report one fifth of the cabinet costs as depreciation expense in selling, general, and administrative expenses. Four fifths of the cabinet cost would remain capitalized as fixed assets at the end of year 1. The cabinets are considered fixed assets and not a part of cost of goods sold.
hence correct answer  is