Why are freehold land and a building on that land normally accounted for separately?
Correct answer: B. The land and building usually have different useful lives
- A. Land is always recorded at its residual value
- B. The land and building usually have different useful lives
- C. Buildings cannot be recognized as non-current assets
- D. Land must always be depreciated faster than buildings
Explanation
Land usually has an unlimited useful life, while a building has a finite useful life. Their separate accounting allows the building to be depreciated without depreciating the land.
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About Depreciation and Non-Current Assets
Non-current assets are long-term resources recorded at cost and reduced by accumulated depreciation to show their carrying amount. Coverage includes straight-line and reducing-balance methods, residual value, useful life, depreciation adjustments, capital and revenue expenditure, and the profit or loss arising when an asset is disposed of.
Practise Depreciation and Non-Current Assets
33 free Depreciation and Non-Current Assets MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
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