Explore BrainMass

Explore BrainMass

    Land and Land Improvements

    All expenditures that are made to acquire land and make it ready for use are consdiered part of the land's cost. Land costs typically include (1) the purchase price; (2) closing costs; (3) costs incurred in order to bring the land into its proper condition for its intended use; and (4) the discharge of any encumbrances on the land, such as taxes, liens, or mortgages. For example, when land is purchased in order to build a building structure, all costs needed to prepare the land are considered land costs up until the point of excavation for the building. Any amounts received for salvaged materials are accounted for as a reduction in the price of the land; for example, the salvage value of materials from an old building that is torn down is added to the value of the land. 

    Improvements to the land that have a distinct useful life - such as driveways, walks, fences, and parking lots - are recorded in a seperate account titled 'Land improvements' and amortized over their useful like. However, where an improvement is permanent it may be added to the land account. For example, improvements such as roadways, streetlights, and sewers are typically maintained or replaced by the local government. As a result, these improvements can typically be viewed as permanent, and charged to the Land account. 

    Land is typically recognized as part of property, plant and equipment. However, land that is purchased for speculation, it is classified as an investment. On a similar note, land that is purchased for a developer or realestate agent is typically classified as inventory. 

    © BrainMass Inc. brainmass.com May 24, 2024, 12:31 pm ad1c9bdddf