Question

Vaughn Manufacturing purchased land as a factory site for $1330000. Vaughn paid $112000 to tear down...

Vaughn Manufacturing purchased land as a factory site for $1330000. Vaughn paid $112000 to tear down two buildings on the land. Salvage was sold for $8100. Legal fees of $5000 were paid for title investigation and making the purchase. Architect's fees were $46300. Title insurance cost $3500, and liability insurance during construction cost $3800. Excavation cost $15440. The contractor was paid $4400000. An assessment made by the city for pavement was $9600. Interest costs during construction were $257000.

The cost of the building that should be recorded by Vaughn Manufacturing is

$4407040.
$4419700.
$4722540.
$4405800.
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Answer #1

Sol. Calculation fro determining Cost of Building to be recorded

Particulars Amount (in $)
Contractor Charges 4400,000
Add: Purchase of Land (to be included in Land Cost) 0
Add: Cost for tear down buildings (to be included in Land Cost) 0
Less: Salvage Value from scrap (to be deducted from cost of land) 0
Add: Legal Fees (to be included in cost of land) 0
Add: Architect's Fees 46,300
Add: Title insurance cost (to be included in cost of land) 0
Add: Liability insurance during construction cost 3,800
Add: Excavation Cost 15,440
Add: Pavement assessment cost (to be included in cost of land) 0
Add: Interest cost during constuction 257,000
Total Cost of Building 4,722,540
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