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Although they are expected to be razed soon and the purpose of purchasing this building was not to earn income from the existing theatre, therefore only a portion of price should be charged.
b. The costs of demolishing the old buildings should be capitalized.
c. The net book value of the old buildings for the company in (c) would be written off when they were razed since they didn’t purchase the building and their cost was its book value. Since book values of real property are typically less than market value, the “cost” of the new buildings would be less than the cost of buildings built by the Archer Company...
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