Question

On February 1, 2020, Waterway Industries purchased a parcel of land as a factory site for $310000. An old building on the property was demolished, and construction began on a new building which was completed on November 1, 2020. Costs incurred during this period are listed below:
Demolition of old building $ 20700
Architect's fees 34700
Legal fees for title investigation and purchase contract 4500
Construction costs 1378000
(Salvaged materials resulting from demolition were sold for $8600.)
Required:
a) Waterway should record the cost of the land and new building, respectively, as _____________.

Answer 1

Answer:

Waterway should record the cost of the land as $322,100 and new building as $1,412,700

Explanation:

In order to calculate the cost of the land we would have to make the following calculation:

cost of the land= purchased of land+Demolition of old building+Legal fees-Salvaged materials sold

cost of the land=$310,000+$ 20,700+4,500-$8,600

cost of the land=$322,100

In order to calculate the cost of the new building we would have to make the following calculation:

cost of the new building=Architect's fees+Construction costs

cost of the new building=$34,700+$1,378,000

cost of the new building=$1,412,700