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ABC Hotel Corporation recently purchased XYZ hotel and the land on which the XYZ hotel is located with the intention to tear down the XYZ

ABC Hotel Corporation recently purchased XYZ hotel and the land on which the XYZ hotel is located with the intention to tear down the XYZ hotel and build a new luxury hotel on the land. The cost of the XYZ hotel should be:

Capitalized as part of the cost of the land.

Capitalized as part of the cost of the new hotel.

Expensed immediately.

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