I didn’t know that … An agricultural lan d lost fertility due to poor crop rotation, drou gh t or soil erosion. Should this land be depreciated? A. Yes, like any long-term property, a land should be depreciated. B. No, land is not depreciable. C. Yes since a material decrease in value happens to this land. D. It depends on fertility of the land for the next 3 years.
I would say B, I think it is a GAAP rule…
B, I think you dont depreciate land
I think C makes sense.
Land is reported at historical cost. But this one is agricultural … so can’t say. I’ll still go with B
I would say B.
I kind of see that weird lime-green limo from the ethics question rolling on that agricultural field. I’d say B.
how about ans A? not sure if i am right
well answer is C … pretty weird and no chance to see that on the exam anyway do u think we can regard that as depletion ?? :s or maybe just impairment ? who cares anyway …
B was my thought. I would like a better explanation of C, if that is the correct answer.
Agriculture land loses value, but land doesn’t depreciate. I’d be tempted to go C cuz of natural resources depletion, but land is not natural resources.
To me, this would be a short term problem due to the land based on not rotating the crops correctly that can be reversed. I am fairly sure that GAAP does not allow companies to depreciate land anyways.
sorry I don’t have more info on that one (that is why I posted it … )
forget companies, even your house can’t depreciated.
my reason for C is that land can be depreciated if it has lost its basic value. Losing market value as normally occurs in real estate of course does not result in depreciating e it, but soil erosion (or think of something worse) can be a serious detriment. What if you purchased land for erecting a main city hospital on it, only to find that the city has decided to run an international airport next to your land. Do you think it makes sense to continue to record the land for $1billion dollars?
you can’t depreciate land but I think you could write it down to fair value (impairment) but thats not the same as depreciation. I don’t trust Schweser or Stalla, they both kind of worry me as the majority of the Q’s that i’ve done have come from those 2 books
Dreary Wrote: ------------------------------------------------------- > my reason for C is that land can be depreciated if > it has lost its basic value. Losing market value > as normally occurs in real estate of course does > not result in depreciating e it, but soil erosion > (or think of something worse) can be a serious > detriment. > > What if you purchased land for erecting a main > city hospital on it, only to find that the city > has decided to run an international airport next > to your land. Do you think it makes sense to > continue to record the land for $1billion dollars? if you bought land for construction purposes, and for some reason you can’t do construction, your land cost is nto going to include construction expenses. ie. you can’t depreciate the land whether you get the bldg up or not.
I agree, impairment would probably be the correct thing to do.
Dreary Wrote: ------------------------------------------------------- > I agree, impairment would probably be the correct > thing to do. That was my thought too.