Land Improvement Account and the Cost of Removing an Old Building

What account is the cost of removing an old building typically charged to?

Answer:

The cost of removing an old building to make land suitable for its intended use is typically charged to the land improvement account.

When an old building needs to be removed in order to prepare the land for its intended use, the cost incurred for the removal is considered part of the land improvement cost. This cost is capitalized as a long-term asset and reflected in the land improvement account. The reason for charging this cost to the land improvement account is because it is essential in making the land ready for its intended purpose.

By capitalizing the cost of removing an old building as part of the land improvement, it allows the company to track and account for the expenses associated with preparing the land. The land improvement cost, including the cost of removing the old building, is then depreciated over its useful life. Typically, the useful life for land improvement assets ranges between 5 and 20 years, depending on the type of improvement made.