EX 10-2 Determine cost of land

Alpine 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?

Answer:
a. Yes. All expenditures incurred for the purpose of making the land suitable for its intended use should be debited to the land account.
b. No. Land is not depreciated.

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