Consider the following facts: Company A acquires land for $96,000 cash. Addition

Question

Consider the following facts:

Company A acquires land for $96,000 cash. Additional costs are as follows:

Removal of shed                                  $    300

Filling and grading                                   1,500

Salvage value of lumber of shed                 120

Broker commission                                  1,130

Paving of parking lot                              10,000

Closing costs                                             560

Hull will record the acquisition cost of the land as

a. $99,610

b. $86,000

c. $97,690

d. None of these answers are correct.

e. $99,370

Explanation / Answer

Acquisition cost of the land

Cost of the land                                    $ 96,000

Removal of shed                                  $      300

Filling and grading                                $ 1,500

Broker commission                                $ 1,130

Closing costs                                      $    560

(-) Salvage value of lumber of shed   ($   120)   

Total acquisition cost of land             $ 99,370  

Acquisition cost means all those costs incurred to bring the land into our possession and usable condition. In this problem, the cost of paving of parking lot i.e $ 10,000 will not be included as it is not qcquisition cost        

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