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View Full Version : I Need True or False Answers


LMH
Jan 8, 2013, 05:43 PM
True or False: If land and building are purchased at the same time, a separate value is assigned in the accounting records to the land and to the building.

paraclete
Jan 8, 2013, 07:20 PM
That depends upon where the value of the land is identifiable and the purchase a separate transaction

Fidget1
Jan 9, 2013, 01:30 PM
It's true.

The general principle is that land does not tend to lose value over time, whereas buildings do lose value over time, and also that one does not need the other to continue to exist as an asset e.g the building could be sold separately or even demolished and therefore written out of the company's books, whilst the land would still exist. Therefore both are recorded as separate assets. Where both have been purchased in a single transaction, there shouldn't be an instance where it is not possible to allocate the cost between the value of the land and value of building since if it wasn't disclosed in the oringinal purchase agreement, then there is a commercial market for valuing land and for valuing buildings.