Answer:
The question is incomplete, below is a possible match of the complete question:
a company purchased property for a building site. the costs associated with the property were:
purchase price $175,00
real estate commisions $15,000
legal fees 800
expenses of clearing the land 2,000
expenses to remove old building 1,000
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?
Answer:
cost allocated to land = $193,800
cost allocated to new building = $0
Explanation:
The expenses associated with the ost of land purchase are all the necessary expenses made in the purchase of the land and in getting the land ready for use. These include legal fees, cost of clearing the land, cost of removing old structures etc. Therefore cost allocated to land is calculated as follows:
cost of land = purchase price + real estate commissions + legal fees + expenses of clearing the land + expenses to remove old building.
cost of land = 175,000 + 15,000 + 800 + 2,000 + 1,000 = $193,800
∴ cost of land = $193,800
cost of new building = $0
There is no transaction associated directly with setting up the new building, all the costs were associated with the acquisition of the land, hence the cost os the new building is $0
