Question

Merchant Company purchased property for a building site The costs associated with the property were:

Purchase price $191,000
Real estate commissions 16,600
Legal fees 2,400
Expenses of clearing the land 3,600
Expenses to remove old buildings2,600
What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?
a. $193,400 to Land; $25,200 to Building.
b. $207,600 to Land; $8,600 to Building.
c. $210,000 to Land; $2,600 to Building.
d. $216,200 to Land; $0 to Building.
e. $213,600 to Lane; $0 to Building.

Answer 1

d. $216,200 to Land; $0 to Building.

Step-by-step explanation:

Calculation of Cost of the land

Purchase price $191,000

Real estate commissions $16,600

Legal fees $2,400

Expenses of clearing the land $3,600

Expenses to remove old building $2,600

Cost of the land $216,200

Calculation of Cost of Building

0.