Question

Alin Co. purchases a building for $300,000 and pays an additional $30,000 for closing costs (brokerage, title, attorney fees). Alin also pays $20,000 in renovations, including painting, carpet, lighting, etc. Alin should record the cost of the building at: Multiple choice question. $320,000. $300,000. $330,000. $350,000.

Answer 1

Answer: $350,000

Step-by-step explanation:

When recording the cost of a fixed asset, all the costs that were incurred to acquire the asset and make it ready for production should be included.

In this case those costs include the actual purchase price, the closing costs and the renovations.

Total building cost is therefore:

= Purchase price + Closing costs + Cost to prepare building

= 300,000 + 30,000 + 20,000

= $350,000