Question

A company purchased property for a building site. The costs associated with the property were: Purchase price $ 184,000 Real estate commissions 15,900 Legal fees 1,700 Expenses of clearing the land 2,900 Expenses to remove old building 1,900 What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building

Answer 1

Answer: The portion of these costs that will be allocated to the cost of the land is $206,400 and the portion that should be allocated to the cost of the new building is 0.

Explanation:

The following information can be gotten from the question:

Purchase price = $184,000

Real estate commissions = $15,900

Legal fees = $1,700

Expenses of clearing the land = $2,900

Expenses to remove old building = $1,900

Therefore, the portion of these costs should be allocated to the cost of the land will be:

= $184,000 + $15,900 + $1,700 + $2,900 + $1,900

= $206,400

It should also be noted that building cost will be 0.