Question

Merchant Company purchased property for a building site. The costs associated with the property were: Purchase Price $ 185,000 Real estate commission $ 15,000 Legal fees $ 700 Expenses of clearing the land $ 2,000 Expenses to remove the old building $ 4,000 What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building

Answer 1

$206,700 to land and $0 to building

Step-by-step explanation:

In business terms half construction means no construction and therefore, building cost is zero.

The building is under construction means it meant that building have not been completely constructed.

Particulars Amount($)

Purchase price $185,000

real estate commission $15,000

legal fees 700

expense of clearing the land $2000

expense of remove old building $4000

portion of costs that will be allocated to land $206,700