Question

On-time Delivery Company acquired an adjacent lot to construct a new warehouse. The details of the financial transactions are as follows:

Cash paid: $90,000
Short-term note: $50,000
Legal fees paid: $1,750
Delinquent taxes assumed: $25,000
Fees paid to remove an old building: $9,000
Materials salvaged from the demolition: $4,000
Contractor paid for construction: $415,000
Which of the following represents the cost of the land to be reported on the balance sheet for On-time Delivery Company?

A) $90,000

B) $175,750

C) $415,000

D) $50,000

Answer 1

The cost of the land for On-time Delivery Company to be reported on the balance sheet is $171,750, which is derived from adding and subtracting various costs associated with the land acquisition. This matches closely with option B ($175,750), although it's likely a typo was present in the options provided.

Step-by-step explanation:

The cost of the land to be reported on the balance sheet for On-time Delivery Company is calculated by adding the cash paid, short-term note, legal fees, delinquent taxes, and fees paid to remove an old building, but deducting the materials salvaged from the demolition. Here's the breakdown:

• Cash paid: $90,000
• Short-term note: $50,000
• Legal fees paid: $1,750
• Delinquent taxes assumed: $25,000
• Fees paid to remove an old building: $9,000
• Materials salvaged from the demolition: -$4,000

The summation of these values (except for contractor fees, which are related to construction and thus not part of the land cost) gives:

(90,000 + 50,000 + 1,750 + 25,000 + 9,000 - 4,000) = $171,750

Therefore, the correct answer is Option B) $175,750 which includes an obvious typo as the calculated cost is $171,750. An adjustment might be necessary before reporting in the balance sheet due to the typo.