1.Following are costs incurred in the past year involved with the opening of a new branch...

1.Following are costs incurred in the past year involved with the opening of a new branch in a company. Use the following information to calculate the total amount that was debited to the land account.

Description	Amount
Fee for Title	300
Architect Fee	3,100
Cash paid for land and old building	80,000
Remova lof building	7,000
Salavage Value of Building Removed	1,000
Purchased machinery	10,000
New building constructed	500,000
Assessment by city for building permit	600
Installation on machinery	1,500
Tree's and landscaping	5,000

Solutions

Expert Solution

Cost of Land :

a)Cash paid for land and old building $80000

b)Fee for Title $300

c)Tree's and landscaping $5000

d)Remova lof building $7,000

e)Salavage Value of Building Removed ($1,000)

Cost Of land to be Debited(a+b+c+d-e) = $91300

Explanation :

Purchase Price:Cost of land includes the price paid for the acquisition of land to the seller.
Closing Costs: includes professional fees paid for title acquisotion, agencies title insurance, survey costs,
Preparation: it includes all the costs associated for making the land ready for its intended purposes. Hence trees and landscapping , grading, draining systems, and removal of structures will be included in the cost however Salvage value received on account of removal of structures will be reduced from the over all cost.

Note : Architect Fee, Assessment by city for building permit are the cost related to building hence they will form part of the building not land

ekkarill92 answered 1 year ago

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