Accounting Treatment Quiz

When an entity acquired land with an old building and immediately demolished the old building so that the land can be used for the construction of a plant, the cost incurred to demolish the old building should be

• Expensed as incurred

• Added to the cost of the plant

• Added to the cost of the land.

• Amortized over the estimated time period between the demolition of the building and the completion of the plant

If an entity purchased a lot and an old building and demolished the old building to make room for the construction of a new building, the proper accounting treatment of the allocated carrying amount of the old building would depend on

• The significance of the cost allocated to the building in relation to the combined cost of the lot and building

• The length of time for which the building was held prior to demolition

• The contemplated future use of the old building

• The intention of management for the property when the new building was constructed

An entity purchased land to be used as an investment property. Timber was cut from the site so development of the land could begin. The proceeds from the sale of the timber should be

• Classified as other income

• Credited to retained earnings

• Deducted from the cost of the land

• Classified as deferred income and amortized over five years

When a company acquires a property that includes an old structure and decides to renovate the existing building instead of demolishing it, the costs incurred for the renovation should be

• Expensed as incurred

• Capitalized as part of the building's cost

• Recorded as a separate asset

• Amortized over the useful life of the building

If an entity purchases land with an existing structure and later decides to lease the land while demolishing the structure, the accounting treatment for the demolition costs would depend on

• The future plans for the land

• The total cost of the land and structure

• The duration of the lease agreement

• The expected useful life of the demolished structure

An organization acquired land for development and sold a portion of the land before construction began. The proceeds from the sale of this portion should be

• Classified as a gain on sale of asset

• Deducted from the cost of the remaining land

• Recorded as revenue from operations

• Classified as a reduction in development costs

If a company acquires land with an old building and decides to repurpose the building for a different use, how should the costs associated with the repurposing be treated?

• Expensed as incurred

• Capitalized as part of the building's cost

• Recorded as a separate asset

• Amortized over the useful life of the repurposed building

When an entity purchases land with an existing structure and later decides to renovate the structure instead of demolishing it, the costs incurred for the renovation should be

• Expensed as incurred

• Capitalized as part of the building's cost

• Recorded as a separate asset

• Amortized over the useful life of the building

If an organization acquires land and an old building, and later sells the old building before any development occurs, how should the proceeds from the sale be accounted for?

• Classified as a gain on sale of asset

• Deducted from the cost of the land

• Recorded as revenue from operations

• Classified as a reduction in development costs