In 2006, Jarrett Company purchased a tract of land as a possible future plant site. In January, 2014, valuable sulphur deposits were discovered on adjoining property and Jarrett Company immediately began explorations on its property. In December, 2014, after incurring $800,000 in exploration costs, which were accumulated in an expense account, Jarrett discovered sulphur deposits appraised at $4,500,000 more than the value of the land. To record the discovery of the deposits, Jarrett should

Question

Quizplus · Accepted Answer

The correct action is to capitalize the exploration costs incurred ($800,000) by debiting an asset account, reflecting the costs of discovering the sulphur deposits as an increase in the asset's value.

In 2006, Jarrett Company Purchased a Tract of Land as a Possible