Question

Which of the following is true regarding costs to be capitalized in the acquisition stage? When...

Which of the following is true regarding costs to be capitalized in the acquisition stage?

When land with an old building is purchased as a future building site, the cost of removing the old building is part of the cost of the new building.

Insurance on equipment purchased, while the equipment is in transit, is part of the cost of the equipment.

Most research and development costs are capitalized

Both land and land improvement are depreciable
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Answer #1

Your required answer is option B i.e. Insurance on equipment purchased, while the equipment is in transit, is part of the cost of the equipment.

Explanation:

Insurance on equipment purchased while the equipment is in transit is considered as a part of cost of equipment. The cost of Assets (in this case equipment) also includes (capitalized) interest expense, insurance expense and other ancillary charges necessary to to reach that assets till there location or factory.

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