Question

a company purchased land for $95,000 cash. commissions of $14,500, property taxes of $15,000, and title insurance of $4,800 were also incurred. the $15,000 in property taxes includes $8,000 in back taxes paid by the company on behalf of the seller and $7,000 due for the current year after the purchase date. for what amount should the company record the land?

Answer 1

Step-by-step explanation:

To determine the amount at which the company should record the land, we need to add the purchase price and all the costs directly related to the purchase. However, we need to subtract any amounts paid on behalf of the seller.

So, the calculation would be:

Purchase price: $95,000

Commissions: $14,500

Title insurance: $4,800

Property taxes (current year only): $7,000

Total cost: $121,300

We need to subtract the $8,000 in back taxes paid on behalf of the seller, so:

Total cost - Back taxes: $121,300 - $8,000 = $113,300

Therefore, the company should record the land at a cost of $113,300.