CA10-7 (Cost of Land vs. Building—Ethics)

Answer (a) Allocation of a very high proportion of the cost on the warehouse itself as proposed by Carter, and recognition of the increasing value of the land regardless of the depreciation potential of the warehouse as suggested by Ankara.

Answer (b) Carter’s suggestion is aimed at evading paying fully the required tax which is against the law on tax remittance. Thus it is unethical action.

Answer (c) The cost should partly be allocated to the warehouse and partly recognize the increasing value of the land.