Question

A company purchased land for $92,000 cash. Commissions of $13,000, property taxes of $13,500, and title insurance of $4,200 were also incurred. The $13,500 in property taxes includes $7,400 in back taxes paid by the company on behalf of the seller and $6,100 due for the current year after the purchase date. For what amount should the company record the land? a. $112,400. b. $116,600. c. $122,700. d. $92,000.

Answer 1

The answer is option (b) $116,600.00

Step-by-step explanation:

Solution

The Cash price =$92,000.00

Commission on purchase of land $ = 13,000.00

Property taxes =$7,400.00

Title insurance is=$ 4,200.00

Total cost of land to be recorded is =$116,600.00

The property taxes paid for back date will be added to the land cost but not $6100 which is related to present year.

The property taxes $6100 will be filled to income statement in present year.

Title insurance and commission will be included to cost of land.