Question

Four Corners Delivery Company acquired an adjacent lot to construct a new warehouse, paying $40,000 and giving a short-term note for $240,000. Legal fees paid were $2,310, delinquent taxes assumed were $11,800, and fees paid to remove an old building from the land were $17,000. Materials salvaged from the demolition of the building were sold for $4,200. A contractor was paid $851,200 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet.

Answer 1

$306,910

Step-by-step explanation:

the cost of the land includes:

• cash payment $40,000
• short term note $240,000
• legal fees $2,310
• delinquent taxes assumed $11,800
• demolition fees $17,000
• - salvaged materials sold ($4,200)

total $306,910

The cost of the construction must be recorded under buildings (warehouse) since it is a depreciable asset.