Question

On July 1, 2016, Larkin Co. purchased a $400,000 tract of land that is intended to be the site of a new office complex. Larkin incurred additional costs and realized salvage proceeds during 2016 as follows: Demolition of existing building on site $75,000 Legal and other fees to close escrow 12,000 Proceeds from sale of demolition scrap 10,000 What would be the balance in the land account as of December 31, 2016?

A. $475,000.
B. $487,000.
C. $400,000.
D. $477,000.

Answer 1

Option (D) is correct.

Step-by-step explanation:

Given that,

Purchase cost = $400,000

Demolition of existing building on site = $75,000

Legal and other fees to close escrow = $12,000

Proceeds from sale of demolition scrap = $10,000

Balance in the land account as of December 31, 2016:

= Purchase cost + Demolition of existing building on site + Legal and other fees to close escrow - Proceeds from sale of demolition scrap

= $400,000 + $75,000 + $12,000 - $10,000

= $477,000