Question

On February 1, 2020, Nelson Corporation purchased a parcel of land as a factory site for $320,000. 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 $ 20,000Architect's fees 35,000Legal fees for title investigation and purchase contract 5,000Construction costs 1,390,000(Salvaged materials resulting from demolition were sold for $10,000.)

Nelson should record the cost of the land and new building, respectively, as?

Answer 1

Answer:

$335,000; $1,425,000

Explanation:

Record cost of the land as follows:

= Cost of purchasing parcel of land + Demolition of old building + Legal fees - value of Salvaged materials sold

= 320,000 + 20,000 + 5,000 - 10,000

= $335,000

Record cost of the new building as follows:

= Architect's fees + Construction costs

= 35,000 + 1,390,000

= $1,425,000