Question

A company purchased a $500,000 tract of land that is intended to be the site of a new office complex. The company incurred additional costs and realized salvage proceeds as follows: Demolition of existing building on site $ 75,000 Legal and other fees to close escrow 15,000 Proceeds from sale of demolition scrap 10,000 What would be the capitalized cost of the land?

Answer 1

Answer:

$580,000

Explanation:

Given:

Purchase price = $500,000

Demolition cost = $75,000

Legal and other fees to close escrow = $15,000

Proceeds from sale of demolition scrap = $10,000

Now,

capitalized cost of the land will be

= Purchase price + Demolition cost  + Legal and other fees to close escrow - Proceeds from sale of demolition scrap

= $500,000 + $75,000 +  $15,000 - $10,000

= $580,000