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Bridger Ski Co. has developed a tract of land into a ski resort. The company has cut the trees, cleared and graded the land and hills, and constructed ski lifts. (a) Should the tree cutting, land clearing, and grading costs of constructing the ski slopes be debited to the land account? (b) If such costs are debited to Land, should they be depreciated? Explain.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 10, Problem 2E
Textbook Problem
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Bridger Ski Co. has developed a tract of land into a ski resort. The company has cut the trees, cleared and graded the land and hills, and constructed ski lifts.

Chapter 10, Problem 2E, Bridger Ski Co. has developed a tract of land into a ski resort. The company has cut the trees, (a) Should the tree cutting, land clearing, and grading costs of constructing the ski slopes be debited to the land account? (b) If such costs are debited to Land, should they be depreciated? Explain.

(a)

To determine

Explain whether the tree cutting, land clearing, and grading costs of constructing the ski slopes should be debited to the land account.

Explanation of Solution

Cost of Land: The cost of land includes the following costs:

  • Purchase price of land
  • Attorney fees
  • Real estate agent commission
  • Title
  • Recording fees
  • Additional expenses :
    • Clearing
    • Filling and leveling of land
    • Removing of old buildings

The cost of acqu...

(b)

To determine

Explain whether such costs debited to land account should be depreciated.

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Financial Accounting
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