Question

Hull Company acquires land for $86,000 cash. Additional costs are as follows:

Removal of shed
$300

Filling and grading
1,500

Salvage value of lumber of shed
120

Broker commission
1,130

Paving of parking lot
10,000

Closing costs
560


Hull will record the acquisition cost of the land as


$86,000.


$89,610.


$89,370.


$87,690

Answer 1

The acquisition cost of the land for Hull Company is $89,610.

Step-by-step explanation:

The acquisition cost of the land will be the sum of the initial cash payment and the additional costs incurred. In this case, the acquisition cost of the land is:

$86,000 (initial cash payment) + $300 (removal of shed) + $1,500 (filling and grading) + $120 (salvage value of lumber of shed) + $1,130 (broker commission) + $10,000 (paving of parking lot) + $560 (closing costs) = $89,610.

Therefore, Hull will record the acquisition cost of the land as $89,610.

Answer 2

It will be recorded as $86000. The rest will simply be recorded as expenses.