Question

A company has purchased a tract of land. It expects to build a production plant on the land in approximately 5 years. During the 5 years before construction, the land will be idle. The land should be reported as:__________
a. property, plant, and equipment.
b. land expense.
c. a long-term investment.
d. an intangible asset.

Answer 1

Answer:

c. a long-term investment.

Explanation:

A long-term investment is an asset that a business tends to keep for more than one year.  An investor or business that acquires a long-term investment has no intention of selling in the short or medium term. Some long-term investments will never be sold.

The land will be recorded as a long term investment. It qualifies an asset because it will be used in the production of other goods, thereby generating income for the business. The land will be used after five years; hence it's a long term investment.