Question

Select all that apply

Sarah purchases land to be used for a new storage facility. Which of the following items are capitalized in the cost of land?
a. Commissions
b. Costs to remove an old building
c. Legal fees to secure title
d. Current year's property taxes

Answer 1

Commissions, costs to remove an old building, and legal fees to secure title are capitalized in the cost of land.

Step-by-step explanation:

In the cost of land, the items that are capitalized are:

• a. Commissions: If Sarah paid any commissions when purchasing the land, those costs would be included in the capitalization of the land.
• b. Costs to remove an old building: If there was an old building on the land that needed to be removed, the costs associated with demolishing and removing the building would be capitalized.
• c. Legal fees to secure title: Legal fees paid to secure the title of the land would also be included in the capitalization of the land.

The current year's property taxes,

(d), are not capitalized. Property taxes are typically considered an ongoing expense and would not be included in the cost of land.