Question

1. Chapter 10: Revenue Expenditures vs Capital Expenditures gali A) DETERMINING COST OF PLANT ASSETS 1- Land Ex Assume that Hayes Company acquires real estate at a cash cost of $100,000. The property contains an old warehouse that is razed at a net cost of $6,000 ($7,500 in costs less $1,500 proceeds from salvaged materials). Additional expenditures are the attorney's fee, $1,000, and the real estate broker's commission, $8,000. 14 1235/42:37

Answer 1

Answer)

Calculation of cost of Land

Particulars	Amount (In $)
Cash cost of property	100,000
Net cost of razing of old warehouse	6,000
Attorney's fees	1,000
Real estate broker's commission	8,000
Total cost	115,000

Therefore total cost of property is $ 115,000

Note: The cost of Plant assets includes all expenses (i.e. purchase price and other related expenses) that are incurred to make the asset ready for intended use. It will thus include all site preparation expenses (razing expenses of old warehouse in this example), all legal expenses and sales commission paid to acquire the property.