When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the costs incurred to tear down the building should be:

Question

Quizplus · Accepted Answer

The costs incurred to tear down the building are considered part of the land preparation costs and are therefore capitalized as part of the cost of the land. This is because the land cannot be used for its intended purpose without removing the existing structure, making these costs directly attributable to getting the land ready for its new use.

When a Company Purchases Land with a Building on It