Question

Determine the cost of the land, based on the following data.

Land purchase price $90,000
Broker's commission 7,500
Payment for the demolition and removal of existing building 2,500
Cash received from the sale of materials salvaged from the demolished building 500

Answer 1

$99,500

Step-by-step explanation:

A capitalized cost is an expense that is added to the cost basis of a fixed asset

They are incurred when building or purchasing fixed assets.

The cost of land based on the data given is calculated as follows

Cost of land = Purchase price 90,000 + Broker's commission 7,500

+ Payment for demolition 2,500 - Sale of scrap. 500

Cost of land = $99,500

Answer 2

Answer: $99,500

Step-by-step explanation:

Cost of land

$

Purchase price 90,000

Broker's commission 7,500

Payment for demolition 2,500

Sale of scrap. (500)

Cost of land = $99,500

A capitalized cost is a expense that is added to the cost of acquiring a fixed asset such as Land. They are added to the cost of the fixed asset at Historical cost and depreciated over the asset's useful life. Broker's commission as well as cost associated to put the land in the right condition are to be capitalized to the purchase price while any cash flow from purchasing the land are to be deducted.