Why is the excavation costs (p) for a new building part of the cost of the building and not the land? The activity of excavating the land is getting it ready for putting a new building up...?

What if letter (k) specified that the razing and removal of old building was to eventually build a new building? Would that cost to raze and remove the old building be part of the new building or the land? And why?

Answer to (p) building

Answer to (k) land

EXERCISES E10-1 (Lo1) (Acqui sition Costs of Realty) The following expenditures and receipts are related to land, land improvements r use in a business enterprise. The receipts are enclosed in parentheses. (a) Money borrowed to pay building contractor (signed a note) (b) Payment for construction from note proceeds (c) Cost of land fill and clearing (d) Delinquent real estate taxes on property assumed by purchaser (e) Premium on 6-month insurance policy during construction (D Refund of 1-month insurance premium because construction completed early (g) Architect's fee on building $(275,000) 275,000 8,000 7,000 6,000 (1,000) 22,000 250,000 (h) Cost of real estate purchased as a plant site (land $200,000 and building s50,000) ) Commission fee paid to real estate agency (j) Installation of fences around property (k) Cost of razing and removing building ) Proceeds from salvage of demolished building (m) Interest paid during construction on money borrowed for construction (n) Cost of parking lots and driveways (o) C (p) Excavation costs for new building 9,000 4,000 11,000 5,000) 13,000 19,000 14,000 3,000 ost of trees and shrubbery planted (permanent in nature) Instructions Identify each item by letter and list the items in columnar form, using the headings shown below. All receipt amounts should be reported in parentheses. For any amounts entered in the Other Accounts column, also indicate the account title. ltem Land Land Improvements Buildings Other Accounts