A company bought land and a building for $128,000. The building has a useful lif

Question

A company bought land and a building for $128,000. The building has a useful life of 20 years. Why should the company split the $128,000 cost between the land and the building?

A) Land is not depreciated, while the building will be depreciated over its 20year useful life.

B) Both the land and the building will be depreciated over 20 years.

C) The land will be depreciated over 40 years and the building will be depreciated over 20 years.

D) The cost should not be split between the land and building.

Explanation / Answer

Land is not depreciated, while the building will be depreciated over its 20year useful life so the company should split the $128,000 cost between the land and the building Option A is correct

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