Question

On February 1, 2017, 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, 2017. Costs incurred during this period are listed below:
Demolition of old building $ 20,000

Architect's fees 35,000

Legal fees for title investigation and purchase contract 5,000

Construction 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?

a. $345000 and $1415000.

b. $330000 and $1430000.

c. $330000 and $1425000.

d. $335000 and $1425000.

Answer 1

Answer:

$335000 and $1425000

Explanation:

The values given are:

-Demolition of old building=$ 20,000

-Architect's fees=$35,000

-Legal fees for title investigation and purchase contract=$5,000

-Construction costs=$1,390,000

-Salvaged materials resulting from demolition=$10,000

-Cost of factory site= $320000

Therefore,

1) The cost of land is:

$320000+$5000+$20000-$10000

= $335000

2) The cost of the new building is:

$35000+$1390000

= $1425000

Thus, the cost of the land and new building is $335000 and $1425000 respectively.