Question

On March 1, 2015, Landon Company acquired real estate on which it planned to construct a small office building. The company paid $90,000 in cash. An old warehouse on the property was razed at a cost of $7,600; the salvaged materials were sold for $1,700. Additional expenditures before construction began included $1,100 attorney's fee for work concerning the land purchase, $4,000 real estate broker's fee, $7,800 architect's fee, and $14,000 to put in driveways and a parking lot. Determine the amount to be reported as the cost of the land.

Answer 1

Answer:

The amount to be reported as the cost of the land is  $101,000

Explanation:

Given information

Paid cash - $90,000

Cost of property $7,600

Salvaged materials - $1,700

Attorney's fee for work concerning the land purchase -  $1,100

Real estate broker's fee -  $4,000

Architect's fee - $7,800    

Put in driveways and a parking lot - $14,000

For computing the amount of the cost of the land, the Architect's fee and Put in driveways and a parking lot is not considered as it is not related to the land expenses. The computation is shown below

= Cash amount + Cost of property - Salvaged materials + Attorney's fee + Real estate broker's fee

= $90,000 + $7,600 - $1,700 + $1,100 + $4,000

= $101,000

Thus, the amount to be reported as the cost of the land is  $101,000