A company purchased land for $78,000 cash. Commissions of $6,000, property taxes of $6,500, and title...

A company purchased land for $78,000 cash. Commissions of $6,000, property taxes of $6,500, and title insurance of $1,400 were also incurred. The $6,500 in property taxes includes $4,600 in back taxes paid by the company on behalf of the seller and $1,900 due for the current year after the purchase date. For what amount should the company record the land?

Multiple Choice

$88,600.

$90,000.

$91,900.

$78,000.

Expert Solution

The Company should record the land at $ 90,000/- (i.e. option b) which shall be calculated as follows:-

Value of Land (paid in cash) : $78,000

Add: Commissions : $6,000

Add: Insurance : $1,400

Add: Property Tax (paid on behalf of seller) : $4,600

Total Value to be recorded $90,000

Note: Property tax amounting to $1,900 which belongs to the current year after the purchase date is not added to the value of land recorded by the company.

ekkarill92 answered 2 years ago

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