Question

On February 1, 2012, Nelson Corporation purchased a parcel of land as a factory site for $250,000. An old building on the property was demolished, and construction began on a new building which was completed on November 1, 2012. Costs incurred during this period are listed below:

Demolition of old building $ 20,000Architect's fees 35,000Legal fees for title investigation and purchase contract 5,000Construction costs 1,290,000(Salvaged materials resulting from demolition were sold for $10,000.)
Nelson should record the cost of the land and new building, respectively, as:
a. $275,000 and $1,315,000.
b. $260,000 and $1,330,000.
c. $260,000 and $1,325,000.
d. $265,000 and $1,325,000.

Answer 1

d. $265,000 and $1,325,000.

Step-by-step explanation:

The computation is shown below:

For land:

= Factory lite + Demolition of old building + Legal fees for title investigation and purchase contract - Salvaged materials resulting from demolition

= $250,000 + $20,000 + $5,000 - $10,000

= $265,000

For new building:

= Architect's fees + Construction costs

=$35,000 + $1,290,000

= $1,325,000