Question

During 2016, Burr Co. made the following expenditures related to the acquisition of land and the construction of a building:

Purchase price of land $ 60,000
Legal fees for contracts to purchase land 2,000
Architects' fees 8,000
Demolition of old building on site 5,000
Sale of scrap from old building 3,000
Construction cost of new building (fully completed) 350,000
What amounts should be recorded as the initial values of the land and the building?
1) Land
2) Building
During 2016, Burr Co. made the following expenditures related to the acquisition of land and the construction of a building:
a) 1) $60,000
2) $360,000
b.1) $62,000
2) $360,000
c.1) $64,000
2) $358,000
d.1) $65,000
2) $362,000

Answer 1

The initial value of the land is $62,000 and the initial value of the building is $350,000.

Step-by-step explanation:

The initial value of the land is the purchase price of $60,000, plus any additional costs incurred to acquire the land. In this case, the legal fees for contracts to purchase land amount to $2,000. Therefore, the initial value of the land is $60,000 + $2,000 = $62,000.

The initial value of the building is the construction cost of the new building, which is $350,000. Any costs incurred before the building is fully completed, such as architects' fees and demolition costs, are not included in the initial value of the building. Therefore, the initial value of the building is $350,000.