Respuesta :
The cost of the Emporia Hotel should be capitalized as part of the cost of the land (B).
Cotton Hotel Corp. decides to purchase Emporia Hotel and its land with the plan to tear down the Emporia Hotel and build a new luxury hotel on the site.
This purchasing activity should be recorded as a capital in the cost of the land. On accounting, all costs related to the acquisition of a property should be recorder as the cost of land.
Let's take an overview to other options:
Option A: Depreciated over the period from acquisition
Depreciation is the value of a fixed-asset loss over time because of it being used or stored. In this case, the purhcase of the Emporia Hotel should not be recorded as depreciation cost because the Emporia Hotel is just bought by Cotton Hotel Corp.
Option C: Capitalized as part of the cost of the new hotel
This capitalization of asset could be recorded for the renovation and rebuilding process. Because at this stage, the land acquisition process is already finish before the new hotel is started to build.
Option D: Written off as an extraordinary loss
Written off account should be recorded by the Emporia Hotel instead of Cotton Hotel Corp. Every activities and cost spend in preparing the land acquisition until the land is ready to be used should be recorded as the cost of land.
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