Question

Sarasota Inc. purchased land at a price of $33,200. Closing costs were $2,220. An old building was removed at a cost of $11,370. What amount should be recorded as the cost of the land?

Answer 1

$46,790

Step-by-step explanation:

Given;

cost of purchase = $33,200

closing cost = $2,220

Cost for removal of old building = $11,370

Assets are recognized at the cost incurred in making the assets available for use. The closing cost and cost incurred in removing the old building are part of the cost incurred in making the land available for use and as such would be included as part of the cost of the land. Therefore;

Cost of land = $33,200 + $2,220 + $11,370

= $46,790

Answer 2

$ 46,790 amount should be recorded as the cost of the land.

Step-by-step explanation:

As per accounting standards all directly arributable costs are included in cost of asset. These cost includes purchase price, financial charges and professional fee (closing costs), removing items and restoring site cost etc.

So the cost of land will be sum of 33,200 + 2,220 + 11,370 that is $46,790.