Question

Sunland company installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new parking area cost $12,000. Which of the following statements is true with respect to these additions?
A. $30,000 should be debited to the Land account.
B. $12,000 should be debited to Land Improvements
C. $42,000 should be debited to the Land account.
D. $42,000 should be debited to Land Improvements

Answer 1

Answer:

D. $42,000 should be debited to Land Improvements

Explanation:

The cost of the land housing the parking is recorded in the land account. Other costs such as paving cost and lights are improvements and as such are added and recorded in the Land Improvements accounts.

Total Land improvements = $30,000 + $12,000

= $42,000

The right answer is D. $42,000 should be debited to Land Improvements.