Question

the cost of land improvements are capitalized separately from land because land improvements tend to have a useful life.

Answer 1

Land improvements are capitalized separately from Land because land improvements have only a limited useful life.

Land is a special fixed asset which means that:

• It is purchased for long term use
• It is not depreciated because it lasts forever

Land improvements on the other hand, will not last forever. They will eventually wear out and need to be replaced. They are therefore capitalized separately from land so that they can be depreciated if need be.

In conclusion, land improvements are capitalized separately from land because they have a limited useful life.

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