Question

Jones Corporation purchases a piece of land for $300,000. Jones Corp. paid $3,000 in brokerage commissions, $10,000 to clear and remove an unwanted building, $5,000 for building permits to construct a new building, $500,000 to construct a new building, and $5,000 in delinquent property taxes. What is the amount to be capitalized (debitted) to the building account?(A) $500,000(B) $515,000(C) $505,000(D) $823,000(E) I don't know yet

Answer 1

Total amount to be capitalized for building = $505,000

Step-by-step explanation:

All of the costs provided in question is cost to be capitalized, but some in land and the other in building but none is to be charged in revenue account.

The cost to be capitalized in building will be as follows:

$500,000 to construct the building,

$5,000 to permit to construct a building.

Note: The delinquent property taxes are for property inclusive of land, and will be incurred even if no building is there, and therefore not to added in cost of building but will form part of cost of land.

Total amount to be capitalized for building = $505,000