On-Call Service Corporation bought a building lot to construct a new corporate office building.An older home on the building lot was razed immediately so that the office building could be constructed.The cost of purchasing the older home should be
A) recorded as part of the cost of the land.
B) written off as a loss in the year of purchase.
C) written off as an extraordinary item in the year of purchase.
D) recorded as part of the cost of the new building.

Question

Quizplus · Accepted Answer

The cost of purchasing the older home is a part of the cost of the land, as it was necessary to acquire the land for the construction of the new corporate office building. Therefore, it should be recorded as a part of the cost of the land, which will be capitalized and included in the cost of the office building.

On-Call Service Corporation Bought a Building Lot to Construct a New