Exercise 9-3 On March 1, 2017, Westmorlan Company acquired real estate on which

Question

Exercise 9-3 On March 1, 2017, Westmorlan Company acquired real estate on which it planned to construct a small office building. The company paid $80,000 in cash. An old warehouse on the property was razed at a cost of $10,400; the salvaged materials were sold for $2,700. Additional expenditures before construction began included $1,600 attorney’s fee for work concerning the land purchase, $5,500 real estate broker’s fee, $7,400 architect’s fee, and $13,000 to put in driveways and a parking lot. (a) Determine the amount to be reported as the cost of the land.

Cost of land $

Explanation / Answer

(a) Cost of land = Cash paid + Net cost of removing warehouse + Attorney’s fee + Real estate broker’s fee

Cost of land = $80,000 + ($10,400 – $2,700) + $1,600 + $5,500

Cost of land = $94,800

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