Question

Ayer Self Storage purchased land, paying $165,000 cash as a down payment and signing a $185,000 note payable for the balance. Ayer also had to pay delinquent property tax of $2,000, title insurance costing $3,500, and $6,000 to level the land and remove an unwanted bullding. The company paid $52,000 to add soil for the foundation and then constructed an office building at a cost of $1,000,000. It also paid $49,000 for a fence around the property, $17,000 for the company sign near the property entrance, and $11,000 for lighting of the grounds. Read the requirement. The cost of the land is Requirement 1. What is the capitalized cost of each of Ayer's land, land improvements, and building?

Answer 1

The cost of the land is $176,500, the cost of the land improvements is $129,000, and the cost of the building is $1,000,000.

Step-by-step explanation:

To calculate the capitalized cost of each component, we need to add up the relevant costs. The cost of the land is the down payment plus the delinquent property tax, Title insurance, and the cost to level the land and remove the unwanted building. So, the cost of the land is $165,000 (down payment) + $2,000 (delinquent property tax) + $3,500 (title insurance) + $6,000 (leveling the land and removing the building), which equals $176,500.

The cost of the land improvements is the cost to add soil for the foundation, the fence around the property, the company sign near the entrance, and the lighting of the grounds. So, the cost of the land improvements is $52,000 (adding soil) + $49,000 (fence) + $17,000 (company sign) + $11,000 (lighting), which equals $129,000.

The cost of the building is simply the cost of constructing the office building, which is $1,000,000.