Dionne Developments

question 93

Multiple Choice

Dionne Developments. owns a piece of land it had purchased in 20X4 for $600,000. When they started to develop the land in 20X5, they discovered that there were environmental problems with the land. It is now estimated to be worth only $250,000. Which of the following is the correct way to account for this?

• A) The land should be amortized at a new rate to reflect the decline in its value
• B) No accounting is necessary because the land is recorded at its historical cost, not its market value.
• C) The land should be written off completely because now the company cannot use it for the purpose they intended to.
• D) The land account should be written down to $150,000 and a loss recognized.