Question

On March 1, 2022, Sandhill Co. acquired real estate, on which it planned to construct a small office building, by paying $85,000 in cash. An old warehouse on the property was demolished at a cost of $9,200; the salvaged materials were sold for $1,900. Additional expenditures before construction began included $1,400 attorney’s fee for work concerning the land purchase, $5,000 real estate broker’s fee, $8,900 architect’s fee, and $15,000 to put in driveways and a parking lot.
(a) Determine the amount to be reported as the cost of the land.


Cost of land

$Enter a dollar amount

Answer 1

Answer:

The correct answer is $98,700.

Explanation:

According to the scenario, the computation of the given data are as follows:

We can calculate the cost of land by using following formula:

Cost of land = Cash paid + Demolished cost - Salvage sold + Attorney fees + Broker's fees

By putting the value, we get

Cost of land = $85,000 + $9,200 - $1,900 + $1,400 + $5,000

= $98,700

(Note = Architect fee and parking lot amount comes under cost of building)