Question

Deana's Salon purchased land to be used as a parking lot for $50,000 cash. The company assumed $1,500 in property taxes due on the land. The title and realtor fees totaled $500 and the costs to grade the land were $1,200. What is the total cost to be included in the Land account

Answer 1

Cost of land= $53,200

Step-by-step explanation:

According to International Accounting Standards (IAS) 16, Property plant and equipment (PPE), the cost of land includes all of the costs necessary to bring and make it ready for the intended use.

These costs include purchase cost, fees and commission associated with the purchase transaction. Further more, included in the historical cost are the net demolition cost of old structure to prepare the land for use e.g cost of grading

Net cost here means cost of demolition less any incidental proceed from the old structure.

The total,cost of land

= 50,000 + 1,500 +500 +1200

= $53,200