The cost of the land to be reported on the balance sheet is $1,462,065. This encompasses the cash payment, short-term note, legal fees, assumed delinquent taxes, removal fees, and construction cost, minus salvage proceeds.
The cost of the land to be reported on the balance sheet:
| Item | Amount |
|----------------------|---------------------------|
| Cash payment | $25,000 |
| Short-term note | $330,000 |
| Legal fees | $2,365 |
| Delinquent taxes assumed | $11,700 |
| Building removal fees | $19,100 |
| Salvage proceeds | $(5,300) |
| Construction cost | $1,079,200 |
| Total land cost | $1,462,065 |
As you can see, the total cost of the land is $1,462,065. This includes the cash payment, the short-term note, the legal fees, the delinquent taxes assumed, the building removal fees, and the construction cost, minus the salvage proceeds. The relevant costs are included for calculating the cost of the land acquired in an adjacent lot.
Those costs are short-term notes, legal fees, delinquent taxes, and fees paid to remove an old building, less salvage value of materials from the old building. Delinquent taxes are the taxes that the taxpayer has to pay to the IRS. These may remain unpaid for various reasons, like a failure to file the tax before the deadline. It is imperative to recognize these taxes; otherwise, it leads to a penalty or interest payment
Que. On-Time Delivery Company acquired an adjacent lot to construct a new warehouse, paying $25,000 in cash and giving a short-term note for $330,000. Legal fees paid were $2,365, delinquent taxes assumed were $11,700, and fees paid to remove an old building from the land were $19,100. Materials salvaged from the demolition of the building were sold for $5,300. A contractor was paid $1,079,200 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet.