Question

On March 1, 2019, Pharoah Company acquired real estate on which it planned to construct a small office building. The company paid $95,000 in cash. An old warehouse on the property was raised at a cost of $8,900; the salvaged materials were sold for $1,600. Additional expenditures before construction began included $1,900 attorney’s fee for work concerning the land purchase, $5,500 real estate broker’s fee, $7,200 architect’s fee, and $14,700 to put in driveways and a parking lot.

Determine the amount to be reported as the cost of the land.
Cost of Land: $_____

Answer 1

$131,600

Step-by-step explanation:

the total cost of the land should include:

• land purchase value $95,000
• I think the old warehouse was demolished instead of raised, at a cost of $8,900
• they sold the salvaged materials form the old warehouse at ($1,600)
• attorney's fees $1,900
• real estate broker's fee $5,500
• architect's fee $7,200
• land improvements $14,700 (driveway and parking lot)

The land improvements and the architect's fee should also be included since they are made in preparation for the land being used for something else, in this case building a small office building.

The total cost of the land is $95,000 + $8,900 - $1,600 + $1,900 + $5,500 + $7,200 + $14,700 = $131,600