Determining the Cost of an Asset Omar Corporation paid $200,000 for a tract of l
ID: 2491046 • Letter: D
Question
Determining the Cost of an Asset Omar Corporation paid $200,000 for a tract of land that had an old gas station on it. The gas station was demolished at a cost of $20,000 and a new warehouse was constructed on the site at a cost of $550,000. In addition, several other costs were incurred: Legal fees (associated with the purchase of the land) $35,000 Architect fees (associated with the new warehouse) $42,000 Interest on the construction loan (for the new warehouse) $18,000 (1) What value should be assigned to the tract of land? (2) What value should be assigned to the new warehouse? 3.) Why did you include not included the cost in calculating the values assigned to the two long-lived assets? Determining the Cost of an Asset Omar Corporation paid $200,000 for a tract of land that had an old gas station on it. The gas station was demolished at a cost of $20,000 and a new warehouse was constructed on the site at a cost of $550,000. In addition, several other costs were incurred: Legal fees (associated with the purchase of the land) $35,000 Architect fees (associated with the new warehouse) $42,000 Interest on the construction loan (for the new warehouse) $18,000 (1) What value should be assigned to the tract of land? (2) What value should be assigned to the new warehouse? 3.) Why did you include not included the cost in calculating the values assigned to the two long-lived assets?Explanation / Answer
Answer 1 Calculation of value assigned to the tract of land Price paid for tract of land $2,00,000.00 (+) Legal Fees $35,000.00 Cost of land $2,35,000.00 Answer 2 Calculation of value assigned to the new warehouse Construcion cost of new warehouse $5,50,000.00 (+) Demolition cost of old gas station $20,000.00 (+) Architect Fees $42,000.00 (+) Interest on the construction loan $18,000.00 Cost of new warehouse $6,30,000.00 Answer 3 As Each & every cost is assigned to an asset , the answer to justification for expense not included is not applicable.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.