Los Mi-os purchased a large tract of land with the intention to transform it into a cocoa plantation. Before the new seedlings can be planted, the site, which is prone to ﬂooding, must be drained. The cost of the draining should be

Question

Quizplus · Accepted Answer

The cost of draining the land should be capitalized as part of the cost of the land because it is a necessary expense to prepare the land for its intended use, which in this case is a cocoa plantation. Capitalizing this cost allows it to be amortized over the useful life of the plantation, reflecting the benefit the expenditure brings over time.

Los Mi-Os Purchased a Large Tract of Land with the Intention