Ayer Furniture purchased land, paying $ 65 comma 000 cash and signing a $ 330 comma 000 note payable. In addition, Ayer paid delinquent property tax of $ 2 comma 500 , title insurance costing $ 6 comma 000 , and $ 5 comma 000 to level the land and remove an unwanted building. The company then constructed an office building at a cost of $ 650 comma 000. It also paid $ 48 comma 000 for a fence around the property, $ 15 comma 000 for a sign near the entrance, and $ 10 comma 000 for special lighting of the grounds. Determine the cost of the land, land improvements, and building. The cost of the land is $.

The cost of land is $408,500.

Explanation:

For calculating the amount of cost of land. Following things is need to be considered.

1. Cash Paid - $ 65,000

2. Notes Payable - $330,000

3. Property tax - $2,500

4. Title Insurance - $6,000

5. Land leveling cost - $ 5,000

Other costs are irrelevant because it is not related to the land.

The cost of land includes those cost which is related to the land. It can be any transactions, any tax or anything. Whether the cost is additional also, but it should be associated to the land.

So,

Cost of land = Cash paid + notes payable + property tax + title insurance + land leveling cost

= $ 65,000 + $330,000 + $2,500 + $6,000 + $ 5,000

= $408,500

Hence, the cost of land is $408,500.