Select all that applyAccounting for land improvements requires that the costs of land improvements are (Select all that apply.)Multiple select question.included in the cost of land.expensed in the current period.depreciated or amortized over the periods benefited.capitalized.
Question
Select all that applyAccounting for land improvements requires that the costs of land improvements are (Select all that apply.)Multiple select question.included in the cost of land.expensed in the current period.depreciated or amortized over the periods benefited.capitalized.
Solution
The correct answers for the question are:
- Depreciated or amortized over the periods benefited.
- Capitalized.
Land improvements are considered a completely separate asset from the land itself for accounting purposes. These improvements can include anything from landscaping, paving, and fencing to outdoor lighting and sprinklers. Anything that increases the usability of the land can be considered a land improvement.
These costs are not included in the cost of land because they are subject to depreciation over their useful life, unlike land. They are not expensed in the current period, but rather depreciated or amortized over the periods benefited. This means the cost of the improvement is spread out over the length of time it is expected to provide a benefit.
Finally, these costs are capitalized, meaning they are recorded as assets on the balance sheet rather than being expensed on the income statement. This is because they provide a benefit to the company over a period of time longer than a single accounting period.
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