Morris recently purchased a building and the tract of land on which it is located. Morris plans to raze the building immediately and to erect a new building on the site. The value of the original building should be

Question

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The original building should be capitalized as part of the cost of the land since Morris plans to raze it immediately and build a new building on the site. The cost of land includes all costs associated with acquisition (such as purchase price, closing costs, title fees, etc.) as well as any costs necessary to make the land ready for its intended use (such as demolition). Therefore, the cost of the original building should be included in the cost of the land.

Morris Recently Purchased a Building and the Tract of Land