Question

Merchant Company purchased property for a building site. The costs associated with the property were: Purchase Price $ 185,000 Real estate commission $ 15,000 Legal fees $ 700 Expenses of clearing the land $ 2,000 Expenses to remove the old building $ 4,000 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:

$206,700 to land and $0 to building

Explanation:

In business terms half construction means no construction and therefore, building cost is zero.

The building is under construction means  it meant that building have not been completely constructed.

Particulars                                                           Amount($)

Purchase price                                                     $185,000

real estate commission                                               $15,000

legal fees                                                                      700

expense of clearing the land                                  $2000

expense of remove old building                                   $4000

portion of costs that will be allocated to land         $206,700