PRC-1 · Chapter 6 · Question 18 of 100
When an entity acquires a plot of land with an old building on it, intending to use both, how should depreciation be applied?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The building should be depreciated over its useful life, but the land should not be depreciated.
Explanation
Land normally has an unlimited useful life and is therefore not depreciated. Buildings have a limited useful life and must be depreciated. The two must be accounted for separately.
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