Question
Burke company has purchased two tracts of land. One tract will be the site of its new manufacturing plant, while the other is being purchased with the hope that it will be sold in the next year at a profit. How should these tracts of land be reported on the balance sheet?
Answers
GPT-4o mini
In the balance sheet, the two tracts of land should be reported differently based on their intended use:
1. **Land for Manufacturing Plant**: This tract of land will be used for the company's operations and is therefore classified as a **long-term asset** (specifically a fixed asset). It should be reported under "Property, Plant, and Equipment" at its purchase cost, which includes the price paid for the land and any related acquisition costs.
2. **Land Held for Sale**: The second tract of land, which is being purchased with the intention to sell for a profit in the near future, should be classified as a **current asset**. This is because it is expected to be sold within one year. It should be reported under "Current Assets" as part of "Inventories" or as "Assets Held for Sale," depending on the company's accounting policies.
In summary:
- **Land for Manufacturing Plant**: Long-term asset (Property, Plant, and Equipment)
- **Land Held for Sale**: Current asset (Inventories or Assets Held for Sale)
1. **Land for Manufacturing Plant**: This tract of land will be used for the company's operations and is therefore classified as a **long-term asset** (specifically a fixed asset). It should be reported under "Property, Plant, and Equipment" at its purchase cost, which includes the price paid for the land and any related acquisition costs.
2. **Land Held for Sale**: The second tract of land, which is being purchased with the intention to sell for a profit in the near future, should be classified as a **current asset**. This is because it is expected to be sold within one year. It should be reported under "Current Assets" as part of "Inventories" or as "Assets Held for Sale," depending on the company's accounting policies.
In summary:
- **Land for Manufacturing Plant**: Long-term asset (Property, Plant, and Equipment)
- **Land Held for Sale**: Current asset (Inventories or Assets Held for Sale)