Question

Wilson Co. purchased land as a factory site for $600,000. Wilson paid $60,000 to tear down...

  1. Wilson Co. purchased land as a factory site for $600,000. Wilson paid $60,000 to tear down two buildings on the land. Salvage was sold for $5,400. Legal fees of $3,480 were paid for title investigation and making the purchase. Architect's fees were $31,200. Title insurance cost $2,400, and liability insurance during construction cost $2,600. Excavation cost $10,440. The contractor was paid $2,200,000.

An assessment made by the city for pavement was $6,400. Interest costs during construction were $170,000. (compute cost of land and building)

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Answer #1

Assets are acquired at purchase price and the costs that are directly attributable to the cost of the asset.

Cost of Building

Particulars Amount
Architect Fees $31,200
(+)Liability Insurance $2,600
(+)Excavation Cost $10,440
(+)Contractor Cost $2,200,000
(+)Interest Costs $170,000
Cost of Building $2,414,240

Cost of Land

Particulars Amount
Purchase Price $600,000
(+) Tear Down Cost $60,000
(-) Salvage $5,400
(+) Legal Fees $3,480
(+) Title Insurance Cost $2,400
(+) Pavement Cost $6,400
Cost of Land $666,880
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