Paving the parking lot and landscaping are recorded with a debit to ______.Multiple choice question.Construction in Progress, an expenseConstruction in Progress, an assetLand Improvements, an assetLand Improvements, an expense
Question
Paving the parking lot and landscaping are recorded with a debit to ______.Multiple choice question.Construction in Progress, an expenseConstruction in Progress, an assetLand Improvements, an assetLand Improvements, an expense
Solution
The correct answer is "Land Improvements, an asset".
Here's why:
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Paving a parking lot and landscaping are considered as improvements to the land. They increase the usability and value of the land, hence they are capitalized (not expensed) under the account "Land Improvements".
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Land Improvements are considered a long-term tangible asset. They are not an expense because the benefits from these improvements will be received over a long period of time, not just in the current period.
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"Construction in Progress" is an account that is typically used for building construction costs, not for land improvements.
So, when you pay for paving the parking lot and landscaping, you would debit (increase) the "Land Improvements" account, recognizing it as an asset.
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