Question

On March 1, 2022, Cullumber Company acquired real estate, on which it planned to construct a small office building, by paying $86,000 in cash. An old warehouse on the property was demolished at a cost of $9,700; the salvaged materials were sold for $4,400. Additional expenditures before construction began included $1,500 attorney's fee for work concerning the land purchase, $8,400 real estate broker's fee, $10,700 architect's fee, and $17,900 to put in driveways and a parking lot.
Determine the amount to be reported as the cost of the land Cost of land.

Answer 1

Answer:

$101,200

Explanation:

the cost of land = purchase price of the land + razing expenses - sales of salvaged materials + attorney's fees + broker's fees = $86,000 + $9,700 - $4,400 + $1,500 + $8,400 = $101,200

The cost of the driveways and parking lot are recorded separately (as land improvements), not under cost of land because they can be depreciated.

Architect's fees are generally included in the construction costs of the building, not in the land cost. The architect's fees are covered before the construction starts because you need the blueprints in order to start the construction.