Question

Exercise 9-3 On March 1, 2019, Blossom Company acquired real estate on which it planned to construct a small office building. The company paid $80,000 in cash. An old warehouse on the property was razed at a cost of $10,400; the salvaged materials were sold for $2,700. Additional expenditures before construction began included $1,600 attorney's fee for work concerning the land purchase, $5,500 real estate broker's fee, $7,400 architect's fee, and $13,000 to put in driveways and a parking lot. Determine the amount to be reported as the cost of the land Cost of land _____

Answer 1

Answer:

$115,200

Explanation:

The amount to be reported as the cost of the land is the sum of the amount paid for the land and other associated cost necessary to bring the land to a usable condition.

Given,

cash paid for land = $80,000

cost of warehouse razed = $10,400

Salvaged material = -$2,700

Attorney's fee for work concerning the land purchase = $1,600

Real estate broker's fee = $5,500

Architect's fee = $7,400

Cost of Driveways and a parking lot = $13,000

Amount to be reported as the cost of the land

= $80,000 + $10,400 -$2,700 + $1,600 + $5,500 + $7,400 +  $13,000

= $115,200