Question

Which statement is true about land?

a) Land should be depreciated over the same period as the building located on it.
b) Land cannot be depreciated for greater than a 40-year period.
c) Land should not be depreciated.
d) The straight line method should be used to depreciate land.

Answer 1

Land is a unique asset in accounting, and unlike buildings or equipment, it is considered to have an indefinite useful life.Thus, the correct option is c) Land should not be depreciated.

Step-by-step explanation:

Therefore, it should not be depreciated. Depreciation is a method used to allocate the cost of tangible assets over their useful lives, but since land does not wear out, become obsolete, or have a limited useful life, it does not qualify for depreciation.

Depreciating land would go against the fundamental principles of accounting, as it would inaccurately represent the true value of the asset. Land typically appreciates in value over time, and accounting standards recognize this by not allowing depreciation on land. This aligns with the cost principle, which states that assets should be recorded at their historical cost, and the historical cost of land remains unchanged over time.

In summary, option c) "Land should not be depreciated" is the correct answer. Depreciation is not applicable to land, and recognizing this fact ensures that financial statements accurately reflect the economic reality of the asset.

Therefore, the correct option is c) Land should not be depreciated.