Question

Sunland Company acquires land for $77000 cash. Additional costs are as follows.

Removal of shed $500
Filling and grading 1600
Salvage value of lumber of shed 170
Broker commission 1150
Paving of parking lot 11000
Closing costs 500
Sunland Company will record the acquisition cost of the land as:

Answer 1

$91,580

Step-by-step explanation:

The cost of an asset includes all cos incurred in making the asset available for use. These includes the cost of the item net all discounts, sales tax, freight cost etc.

As long as the cost is necessary for the asset to be available for use, such cost will be capitalized with the cost of the item of asset. Other cost such as maintenance, insurance costs are expensed and not considered as a part of the cost of the asset.

Cost of Land

= $77000 +$500 + $1600 - $170 + $1150 + $11000 + $500

= $91,580