Question

A company purchased land for $350, 000 cash. Real estate brokers commission was $25,000 and $35,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle the cost of land would be recorded at:__________.
a. $385,000
b. $350,000
c. $375,000
d. $410,000

Answer 1

Under the historical cost principle the cost of land would be recorded at: d. $410,000 .

Explanation:

Given:

Purchase cost of land = $350,000

Brokers commission = $25,000

Cost for demolishing old building = $35,000

Principle cost of land = ?

Principle cost of land= Purchase cost of land+ Brokers commission+ Cost for demolishing old building

            = $350,000+$25,000+$35,000

            = $410,000

Principle cost of land= $410,000

The correct option is d.$410,000.