In 2011, as part of a property purchase Melrose Ltd.incurred and paid 2010 property taxes.These costs should be:
A)recognized as an impairment loss
B)recognized on the income statement as an expense
C)recognized as a capital cost
D)not be taken into consideration, these costs are irrelevant.

Question

Quizplus · Accepted Answer

The 2010 property taxes paid by Melrose Ltd. as part of a property purchase in 2011 should be recognized as a capital cost. This is because such taxes are directly associated with the acquisition of the property and therefore should be added to the property's cost basis, enhancing its value on the balance sheet rather than being expensed in the income statement.

In 2011, as Part of a Property Purchase Melrose Ltd