Question

On December 1, 2020, Oriole Company purchased a tract of land as a factory site for $760000. The old building on the property was razed, and salvaged materials resulting from demolition were sold. Additional costs incurred and salvage proceeds realized during December 2020 were as follows:

Cost to raze old building - $67000
Legal fees for purchase contract and to record ownership - 9700
Title guarantee insurance - 16200
Proceeds from sale of salvaged materials - 6700
In Oriole's December 31, 2020 balance sheet, what amount should be reported as land?

Answer 1

$846,200

Step-by-step explanation:

The computation of the land value that is to be reported on the balance sheet is shown below:

= Purchase value of a tract of land + Cost to raze old building + legal fees incurred + Title guarantee insurance - proceeds from the sale of salvaged materials

= $760,000 + $67,000 + $9,700 + $16,200 - $6,700

= $846,200

The salvage value should be deducted and other values should be added as these are related to the cost of the land