Question

Soccer Wholesale purchased land and a warehouse for one price of $810,000. In addition to the purchase price, Soccer Wholesale makes the following expenditures related to the acquisition: broker's commission, $49,300; title insurance, $4,100; and miscellaneous closing costs, $6,300. The warehouse is immediately demolished at a cost of $78,100 in anticipation of building a new warehouse.

  

Determine the amount Soccer Wholesale should record as the cost of the land.

Answer 1

Answer

These cost include Purchase cost , Fees and Commission associated with the purchase transaction.Further, more included in the historical cost are the net demolition cost of old structure to prepare the land for use. Net cost here means cost of demolition less any incidental proceed from the old structure.The land is not depreciated because it has an infinite life span.

  Cost of land = $810,000 + $49,300 + $4,100 + $6,300 + $78,100

= 947,800