The complete question is:
On-Time Delivery Company acquired an adjacent lot to construct a new warehouse, paying $90,000 in cash and giving a short-term note for $50,000. Legal fees paid were $1,750, delinquent taxes assumed were $25,000, and fees paid to remove an old building from the land were $9,000. Materials salvaged from the demolition of the building were sold for $1,000. A contractor was paid $415,000 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet.
The cost of land to be reported exists at $174,750.
<h3>How to determine the cost of the land to be reported on the balance sheet?</h3>
The cost of land noted in the balance sheet does not only contain the price spent to gain the land but also includes any costs/revenue obtained in the procedures, and activities required to obtain the land to the setting in which it may be prepared for use.
Therefore, except for the price paid which exists at $140,000 ( $90,000 cash and $50,000 short-term note), we have to count up all the applicable expenses including Legal fees, delinquent taxes, Disposal of old building expenditures and remove the material salvaged profit from the destruction of the old building. The construction cost of the new warehouse exists extraneous here as, without this cost, the land exists already in a ready-to-use stage ( i.e: for building a new property on the land)
So, the amount of Cost of land to be reported exists
140K + 1,75K + 25K + 9K - 1K = $174,750.
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