Question

Land was purchased to be used as the site for the consruction of a plant. A building on the property was sold and removed by the buyer so that construction on the plant could begin. The proceeds from the sale of the building should be:

a. Classified as other income.

b. Deducted from the cost of the land.

c. Netted against the costs to clear he land and expensed as incurred.

d. Netted against the costs to clear the land and amortized over the life of the plant.

Answer 1

B. Deducted from the cost of the land

Step-by-step explanation:

Since the building was part of the land, the initial cost of the land included the estimated cost of the building on it. So, when the building was sold, the proceeds gotten from the sale of the building would then be deducted from the cost of the land because as started earlier the initial land purchase include the estimated cost of the building.