Determining Cost of Land Fastball Delivery Company acquired an adjacent lot to c

Question

Determining Cost of Land Fastball Delivery Company acquired an adjacent lot to construct a new warehouse, paying $34,000 and giving a short-term note for $273,000. Legal fees paid were $2,170, delinquent taxes assumed were $13,300, and fees paid to remove an old building from the land were $19,900. Materials salvaged from the demolition of the building were sold for $4,600. A contractor was paid $933,300 to construct a new warehouse Determine the cost of the land to be reported on the balance sheet.

Explanation / Answer

The cost of land will include all the costs and expenses paid for purchase of land including legal fees, delinquent taxes and fees paid to remove old building from land etc. but it will not include the cost to construct a new warehouse (as this cost is the part of warehouse building). Cost of land is calculated as follows:-

Calculation of Cost of Land (Amount in $)

Therefore the cost of land to be reported on the balance sheet is $337,770.

1) Cash paid for Land 34,000 2) Short-term note given for land 273,000 3) Legal fees paid 2,170 4) Delinquent taxes paid 13,300 5) Fees paid to remove an old building from the land 19,900 6) Total costs (1+2+3+4+5) 342,370 7) Sale of salveged materials (4,600) 8) Total Cost of Land (6-7) 337,770

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