AB recently purchased an old building and the land on which it is located. The old building will be demolished at a net cost of $10,000. A new building will be built on the site. The demolition cost should be:

Question

Quizplus · Accepted Answer

The demolition cost of the old building is capitalized as part of the cost of the land because it prepares the land for its intended use. Costs incurred to prepare land for its intended use are included in the cost of the land, not the new building or as a separate depreciation expense or loss.

AB Recently Purchased an Old Building and the Land on Which