Question

A company purchased a 3-acre tract of land for a building site for $480,000. The company demolished the old building at a cost of $25,000, but was able to sell scrap from the building for $2,800. The cost of title transfer was $1,550 and attorney fees for reviewing the contract was $760. Property taxes paid were $9,500, of which $900 covered the period after the purchase date. The capitalized cost of the land is: Multiple Choice $514,860. $514,610. $513,110. $379,610.

Answer 1

$513,110

Step-by-step explanation:

The computation of the cost of the land is shown below:

= Purchase tract of land + demolished cost of old building - scrap of the building + title transfer cost + attorney fees + property taxes - amount covered the period

= $480,000 + $25,000 - $2,800 + $1,550 + $760 + $9,500 - $900

= $513,110

We simply applied the above formula