Question

In: Accounting

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


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