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A- Required: What is the meaning of the term capitalization? Why do we capitalize long-term assets? B - Required: Why must Land Improvements be categorized
A- Required: What is the meaning of the term capitalization? Why do we capitalize long-term assets? B - Required: Why must Land Improvements be categorized separately from Land on a fixed asset register? C- Required: A company paid $1,000,000 for a plot of land that is intended to be the site of a new facility. Consider the following additional costs/proceeds. What should be the total initial cost of the land acquired (ie, the balance in the Land account)? Provide a dollar amount as your response. Document your decision for each line item for possible partial credit. ITEM AMOUNT AMOUNT TO CAPITALIZE? Purchase price 1,000,000 ? An existing mortgage acquired with the land: 150,000 ? Annual property taxes accruing after the purchase: 10,000 Cost of installing a fence around the property: 25,000 Fees paid to surveyors/inspectors in the purchase: 6,000 ? Cost of razing an old building on the site: 30,000 Proceeds for steel salvaged from old bldg: 3,000 Realtor commission on the purchase: 40,000
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