Question

Cost of Land On-Time Delivery Company acquired an adjacent lot were $2,480, delinquent taxes demolition of the building were sold for $5,300. A contractor was paid $1,073,100 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet. to construct a new warehouse, paying $32,000 and giving a short-term note for $321,000. Legal fees paid assumed were $13,300, and fees paid to remove an old building from the land were $18,600. Materials salvaged from the

Answer 1

Step 1

Determination of cost of land

As per accepted principle of accounting , cost of land should be reported in the accounts based on all expenses incurred on development of land . Cost of building etc, should not be included in the cost of land.

Step 2

Valuation

Thus the cost of land will be calculated as under

Payment made on acquirement of land $ 32,000

Value of short term note    $ 321,000

Legal fee paid    $ 2,480

Delinquent taxes assumed $ 13,300

Fee paid to remove old building $ 18,600

Total $ 387,380

Less Material salvaged from old building sold $ 5,300

Cost of land to be reported    $ 382,080

Note

1. Payment made to contractor for construction of building is not related to cost of land as it is related to Building.

2. Amount realized on selling material salvaged from removal of old building is to be reduced from expenditure incurred on development of land