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?

Question

Quizplus · Accepted Answer

The costs with an unlimited life (such as the purchase price for land and cost to clear the land) are capitalized as Land, while costs with a limited useful life (such as cost of paving, lighting, and landscaping for the parking lot) are capitalized as Land Improvements because they are subject to depreciation.

Borden Company Incurred the Following Costs to Acquire and Prepare