A company purchased a tract of land on which it expects to build a production plant in approximately five years. During the five years before construction, the land will be idle. In what classification should the land be reported?

Question

Jett Velazquez

Business

2 July, 05:00

A company purchased a tract of land on which it expects to build a production plant in approximately five years. During the five years before construction, the land will be idle. In what classification should the land be reported?

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Answers (1)

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August Glass · Answer 1

A long-term investment.

Explanation:

The land should be classified as a long-term investment.

This is an asset owned by the company, that it intends to keep for more than a year. This asset is usually recorded on the asset side of a company's balance sheet.

It is the opposite of short-term investment which is sold within one year.