On March 1, 2010, Penner Companyacquired real estate on which it planned to cons
ID: 2434026 • Letter: O
Question
On March 1, 2010, Penner Companyacquired real estate on which it planned to construct a smalloffice building. The company paid $80.000 in cash. An old warehouseon the property was razed at a cost of $8,600; the salvagedmaterials were sold for $1,700. Additional expenditures beforeconstruction began included $1,100 attorney’s fee for workconcerning the land purchase, $5,000 real estate broker’sfee, $7,800 architect’s fee, and $14,000 to put in drivewaysand a parking lot.
Instructions
(a) Determine the amount to be reported as the cost of theland
(b) For each cost not used in part (a), indicate the account tobe debited.
Explanation / Answer
(a) Determine the amount to be reported as the cost of theland Land Dr $94,700 Cost of Real estate Cr $80,000 Cost of Razing Cr $8,600 Attorney fee Cr $1,100 Broker Fee Cr $5,000
(b) For each cost not used in part (a), indicate the accountto be debited. Land Improvement A/C Dr 21,800.00 Architect fee Cr $7,800 Dr Way & Prkg lot A/C Cr $14,000
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