On March 1, 2016, S Company acquired real estate, on which it planned to constru

Question

On March 1, 2016, S Company acquired real estate, on which it planned to construct a small office building, by paying $90,000 in cash. An old warehouse on the property was demolished at a cost of $8,200; the salvaged materials were sold for $2,200. Additional expenditures before construction began included $1,500 attorney's fee for work concerning the land purchase, $5,500 real estate broker's fee, $9,100 architect's fee, and $16,000 to put in driveways and a parking lot.

Instructions

(a)     Determine the amount to be reported as the cost of the land.

  (b)    For each cost not used in part (a), indicate the account to be debited.

Explanation / Answer

cost of land = cash payment + attorney fee+real state broker fee

                       90000+1500+5500 = 1o7000 cost ol land

demoloshing charges will be debited in cost of land development charges.

architect fee would be debited to cost of construction account

driveways and a parking lot will be added to cost of land development charges hence would be debited in cost of land development

income from sale of scrap will be credited and you can also reduce the land devopment charges.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.