Bayside Ltd

Multiple Choice

Bayside Ltd.owns a piece of land it had purchased in 2010 for $400,000.When they started to develop the land in 2011, they discovered that there were environmental problems with the land.It is now estimated to be worth only $150,000.Which of the following is the correct way to account for this?

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