A lessee incurred cost to construct a walkway and landscaping to improve a leased property. The useful life of the walkway and landscaping cost is fifteen years. The remaining term of the nonrenewable lease is twenty years. The walkway and landscaping cost should be A. Capitalized as leasehold improvement and depreciated over twenty years. B. Capitalized as leasehold improvement and depreciated over fifteen years. C. Capitalized as leasehold improvement and expensed in the year in which the lease expires. D. Expensed as incurred.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A lessee incurred cost to construct a walkway and landscaping to improve
a leased property. The useful life of the walkway and landscaping cost is
fifteen years. The remaining term of the nonrenewable lease is twenty
years. The walkway and landscaping cost should be
A. Capitalized as leasehold improvement and
B. Capitalized as leasehold improvement and depreciated over fifteen years.
C. Capitalized as leasehold improvement and expensed in the year in which the lease expires.
D. Expensed as incurred.
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