Land was purchased to be used as the site for the construction of a plant. A building on the property was sold and removed by the buyer so that construction on the plant could begin. The proceeds from the sale of the building should be
A) classified as other income.
B) deducted from the cost of the land.
C) netted against the costs to clear the land and expensed as incurred.
D) netted against the costs to clear the land and amortized over the life of the plant.

Question

Quizplus · Accepted Answer

The proceeds from the sale of the building should be deducted from the cost of the land, as it reduces the overall cost of the land and the building that was sold is no longer a part of the construction project. This helps to properly allocate costs to the correct assets and ultimately results in a more accurate calculation of the total cost of constructing the plant.

Land Was Purchased to Be Used as the Site for the Construction