Question

Merchant Company purchased property for a building site. The costs associated with the property were:

Purchase price	$	179,000
Real estate commissions		15,400
Legal fees		1,200
Expenses of clearing the land		2,400
Expenses to remove old building		1,400

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
Cost of the land	$      199,400
Cost of the new building	0
Workings:
Cost of the land
Purchase price	$      179,000
Real estate commissions	$        15,400
Legal fees	$          1,200
Expenses of clearing the land	$          2,400
Expenses to remove old building	$          1,400
Cost of the land	$      199,400