Final answer:
The cost of land and building for Martin Co. involves determining the market value of the land based on comparable sales and summing up the costs related to the construction of the building.
Step-by-step explanation:
To determine the cost of the land and building to be recorded on the books of Martin Co., the process is divided into several steps.
The company needs to acquire an accurate property title, which includes surveying the land to determine its dimensions and calculate the acreage.
This data is crucial for valuing the land accurately, especially when transactions or development plans are involved, such as selling the land to builders for erecting properties.
Calculating Land Cost
The cost of the land will be a figure that is influenced by the current market rates, which can be determined by researching local real estate prices.
Detailed analysis would include collecting data on recently sold properties in the area, specifically their sale prices, and basing the land cost on comparable sales.
Calculating Building Cost
As for the building, the costs would include all expenses directly related to its construction.
This could involve materials, labor, and any services such as the land survey if it pertains to the building.
Total explicit costs, like office rental and salaries, should be summed up and subtracted from revenues to determine the accounting profit, which provides insight into the financial feasibility of the building project.
An additional factor to be considered could be environmental factors, such as the temperature's effect on measurement tools like steel tape measures.
However, this is more related to engineering and physical concerns rather than the direct cost calculations for accounting purposes.
Applying Marginal Analysis
Marginal cost and marginal benefit calculations are used in deciding the amount of land to restore for optimal use.
This economic approach can guide decisions about land use, balancing cost against potential gains.