Question

a company purchased a 3-acre tract of land for a building site for $510,000. the company demolished the old building at a cost of $28,000, but was able to sell scrap from the building for $3,100. the cost of title transfer was $1,700 and attorney fees for reviewing the contract was $820. property taxes paid were $11,000, of which $1,050 covered the period after the purchase date. the capitalized cost of the land is:

Answer 1

The capitalized cost of the land is $547,370. This calculation includes the total purchase price, demolition costs, costs of title transfer, and attorney fees, while subtracting the income from scrap sales and non-capitalized property taxes.

Step-by-step explanation:

The capitalized cost of the land includes the purchase price and all additional expenses necessary to prepare the land for its intended use, minus any income received from the land during the preparation phase. Here is the breakdown of the costs:

• Purchase price of the land: $510,000
• Demolition costs: $28,000
• Income from selling scrap: -$3,100
• Cost of title transfer: $1,700
• Attorney fees for contract review: $820
• Property taxes paid: $11,000
• Property taxes covering the period after the purchase date (not capitalized): -$1,050

Adding up all the expenses and subtracting the income from the scrap sale and the non-capitalized property taxes, we get:

$510,000 + $28,000 - $3,100 + $1,700 + $820 + $11,000 - $1,050 = $547,370 as the capitalized cost of the land.