Which item is typically capitalized and depreciated as a fixed asset?

• A. Buildings
• B. Inventory
• C. Wages Payable
• D. Interest Receivable

Answer: (A)

Fixed assets are long-lived tangible items used in the business’s operations, and their cost is capitalized on the balance sheet and depreciated over their estimated useful life. Buildings are a quintessential example: the purchase price plus costs to prepare the property are recorded as an asset, and depreciation spreads that cost over several years as the building provides utility. This contrasts with items like inventory, which is a current asset carried at cost and expensed as cost of goods sold when sold; wages payable, a liability; and interest receivable, a financial asset that is not depreciated. Therefore, the asset that is typically capitalized and depreciated as a fixed asset is the building.