Asked by Aaron Silver on Jul 11, 2024
Verified
On March 1 2017 Landon Company acquired real estate on which it planned to construct a small office building. The company paid $90000 in cash. An old warehouse on the property was razed at a cost of $7600; the salvaged materials were sold for $1700. Additional expenditures before construction began included $1100 attorney's fee for work concerning the land purchase $4000 real estate broker's fee $7800 architect's fee and $14000 to put in driveways and a parking lot.
Instructions
Determine the amount to be reported as the cost of the land.
Real Estate
Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature.
Salvaged Materials
Materials that have been recovered or repurposed from obsolete or discarded sources, often used in manufacturing or construction.
Architect's Fee
The compensation a client pays to an architect for their professional services in designing buildings or structures.
- Identify the constituent costs and appropriate accounting methods for acquisitions of land and associated expenses.
Verified Answer
DC
Daniel CarrilloJul 17, 2024
Final Answer :
Cost of land \text { Cost of land } Cost of land
Cash paid $90,000 Net cost of removing warehouse ($ 7,600-$ 1,700)5,900 Attorney’s fee. 1,100 Real estate broker’s fee4,000‾ Total $101,000‾‾\begin{array}{ll} \text { Cash paid } & \$ 90,000 \\ \text { Net cost of removing warehouse (\$ 7,600-\$ 1,700)} & 5,900 \\\text { Attorney's fee. } & 1,100 \\ \text { Real estate broker's fee} & \underline{4,000}\\\text { Total }&\underline{ \underline{\$ 101,000}} \\\end{array} Cash paid Net cost of removing warehouse ($ 7,600-$ 1,700) Attorney’s fee. Real estate broker’s fee Total $90,0005,9001,1004,000$101,000
Cash paid $90,000 Net cost of removing warehouse ($ 7,600-$ 1,700)5,900 Attorney’s fee. 1,100 Real estate broker’s fee4,000‾ Total $101,000‾‾\begin{array}{ll} \text { Cash paid } & \$ 90,000 \\ \text { Net cost of removing warehouse (\$ 7,600-\$ 1,700)} & 5,900 \\\text { Attorney's fee. } & 1,100 \\ \text { Real estate broker's fee} & \underline{4,000}\\\text { Total }&\underline{ \underline{\$ 101,000}} \\\end{array} Cash paid Net cost of removing warehouse ($ 7,600-$ 1,700) Attorney’s fee. Real estate broker’s fee Total $90,0005,9001,1004,000$101,000
Learning Objectives
- Identify the constituent costs and appropriate accounting methods for acquisitions of land and associated expenses.