Question

On February 1, 2020, Hawser Corporation purchased a parcel of land as a factory site for $960,000. An old building on the property was demolished, and construction began on a new building which was completed on November 1, 2020.

Costs incurred during this period are listed below:
Demolition of old building $ 60,000
Architects Fees 105,000
Legal fees for title investigation and purchase contract 15,000
Construction costs 4,170,000
Salvaged materials resulting from demolition were sold for $30,000.

Hawser should record the cost of the land and new building, respectively, as _________.

Answer 1

Answer:

Cost of land = $1,005,000

Cost of building = $4,275,000

Explanation:

The calculation of cost of the land and new building is shown below:-

Cost of land = Purchase cost + Demolition of old building + Legal fees for title investigation and purchase contract - Salvaged materials

= $960,000 + $ 60,000 + 15,000 - $30,000

= $1,005,000

Cost of building = Architects Fees + Construction costs

= $105,000 + $4,170,000

= $4,275,000