Final answer:
The acquisition cost of the land for Cullumber Company, which includes the purchase price and additional expenses to prepare the land for use, would be recorded as $91,860. This calculation does not include paving costs but does account for the salvage value of lumber subtracted from removal costs.
Step-by-step explanation:
The acquisition cost of the land for Cullumber Company should include the purchase price and all expenditures needed to prepare the land for its intended use. Here's the breakdown:
- Purchase of land: $89,000
- Removal of shed: $200
- Filling and grading: $1,300
- Broker commission: $1,070
- Closing costs: $480
The costs related to the paving of the parking lot ($14,000) are not included in the acquisition cost of the land because these are considered improvements and not a direct cost of getting the land ready for use. The salvage value of lumber from the shed ($190) would be deducted from the associated cost of removal, thus:
- Net cost of shed removal: Removal of shed ($200) - Salvage value ($190) = $10
The total acquisition cost of the land would then be calculated as follows:
$89,000 (land) + $10 (net shed removal) + $1,300 (filling and grading) + $1,070 (broker commission) + $480 (closing costs) = $91,860