Question

Baril Company purchased land for $115,000 with the intentions of constructing a new operating facility. The land purchase included a dilapidated building that was removed at a cost of $16,000. The only salvage value from this old building was some materials which were sold for proceeds of $4,000. Baril had paid surveying costs of $1,800 and legal fees related to land transfer of $6,700. The new building was quickly constructed at a total cost of $422,000. Architectural drawings and permits on the construction of this new facility totaled $18,000 and $10,650 respectively. Insurance premiums of $9,200 are paid annually. The production manager is currently on-site facilitating the production start-up. This manager is an annual salary of $85,000.

a)    Calculate the acquisition cost of the land. Identify each element of cost clearly.

b)   Calculate the acquisition cost of the new building. Identify each element of cost clearly

Answer 1