Question

On march 1, 2017, blossom company acquired real estate, on which it planned to construct a small office building, by paying $80,500 in cash. an old warehouse on the property was demolished at a cost of $8,300; the salvaged materials were sold for $1,720. additional expenditures before construction began included $1,220 attorney's fee for work concerning the land purchase, $4,550 real estate broker's fee, $8,720 architect's fee, and $14,100 to put in driveways and a parking lot. (a) determine the amount to be reported as the cost of the land

Answer 1

$115,670

Step-by-step explanation:

the total cost of the land should include:

• land purchase value $80,500
• the old warehouse was demolished at a cost of $8,300
• they sold the salvaged materials form the old warehouse at ($1,720)
• attorney's fees $1,220
• real estate broker's fee $4,550
• architect's fee $8,720
• land improvements $14,100 (driveway and parking lot)

The land improvements and the architect's fee should also be included since they are made in preparation for the land being used for something else, in this case building a small office building.

The total cost of the land is $80,500 + $8,300 - $1,720 + $1,220 + $4,550 + $8,720 + $14,100 = $115,670