Borden Company incurred the following costs to acquire and prepare land for a new parking lot: purchase price for land, cost to clear the land, cost of paving, lighting for the parking lot, and landscaping for the parking lot. How should the company determine which costs should be recorded as Land Improvements and which cost should be recorded as Land?
a. The costs with a limited life will increase Land, and the costs with an unlimited useful life will increase Land Improvements.
b. The costs to be depreciated will increase Land, and the costs that will not be depreciated will increase Land Improvements.
c. Costs that are depreciable will increase Land Improvements, while other costs are expensed immediately because of a lack of definite life.
d. The costs with an unlimited life will increase Land, and the costs with a limited useful life will increase Land Improvements.
Long-term assets include land, land improvements, furniture and fixtures, building, machinery, vehicle, bond investment, patent, goodwill, and stock investment.
Answer and Explanation: 1
The answer is option D.
The land has unlimited life because its value appreciates and does not depreciate. So, costs related to that increase the...
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fromChapter 9 / Lesson 1
A company's acquisition of long-term operating assets represents a substantial investment. Discover more about these assets, including tangible and intangible assets, and how they are used to generate revenue over time.