Larkspur,Inc.bought a derelict hunting lodge,which it tore down at a cost of $78,000 and replaced with a new lodge.The demolition cost should be:
A)expensed.
B)capitalized.
C)a liability.
D)an addition to contributed capital.

Question

Quizplus · Accepted Answer

The general rule for tangible assets under the cost principle is that all reasonable and necessary costs to acquire and prepare an asset for use should be recorded as a cost of the asset.Accountants say costs have been capitalized when they are recorded as assets (rather than as expenses).