Question

A company incurred the following costs associated with the purchase of a piece of land that it will use to re-build an office building:
Purchase price of the land $ 620,000
Sale of salvaged parts already on land $ 20,000
Demolition of the old building $ 20,000
Ground-breaking ceremony (food and supplies) $ 2,800
Land preparation and leveling $ 7,000


What amount should be recorded for the purchase of the land?

Multiple Choice

$647,000.

$627,000.

$649,800.

$629,800.

Answer 1

Answer:

Option (B) is correct.

Explanation:

Given that,

Purchase price of the land = $620,000

Sale of salvaged parts already on land = $20,000

Demolition of the old building = $20,000

Ground-breaking ceremony (food and supplies) = $2,800

Land preparation and leveling = $7,000

Cost of land :

= Purchase price - Salvage + Demolition cost + Land preparation

= $620,000 - $20,000 + $20,000 + $7,000

= $627,000