Question

In 2014, Kilroy Company purchased land for a new office building at a purchase price of $325,000. There was an existing building on the site that was demolished at a cost of $12,000. Scrap from the demolition was sold for $3,500. The building was completed during 2014. In addition, the following costs were incurred: Professional Fees: Attorneys for the purchase contract $ 7,500 Engineers to determine the required grading $ 18,000 Architects to design new building $ 40,000 Building permits $ 8,000 Construction of new building $ 1,275,000 In Kilroy’s December 31, 2014, financial statements, how will the above costs be reported? Land Building Expense

a. $ 341,000 $ 1,323,000 $ 0
b. $ 351,500 $ 1,315,000 $ 15,500
c. $ 359,000 $ 1,323,000 $ 0
d. $ 333,500 $ 1,275,000 $ 73,500

Answer 1

c. $ 359,000 $ 1,323,000 $ 0

Step-by-step explanation:

LAND EXPENSES

Purchase price of $325,000.

Demolition cost of $12,000.

Scrap disposal ($3,500)

Professional Fees: $ 7,500

Grading $ 18,000

TOTAL 359,000

BUILDING EXPENSES

Architects to design new building $ 40,000

Building permits $ 8,000

Construction of new building $ 1,275,000

TOTAL = $1,323,000