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25 June, 12:53

Desert Company purchased land to be used as a factory site for $1,350,000. Desert paid $100,000 to tear down two buildings on the land. Salvage was sold for $8,500. Legal fees of $5,250 were paid for title investigation and making the land purchase. Architect's fees were $46,600. Title insurance cost $3,600 and liability insurance during construction cost $3,900. Excavation cost $16,720. The contractor was paid $4,200,000. Landscaping cost $9,800. Interest costs during construction were $225,000. What is the historical cost of the land that should be recorded by Desert, Co.?

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Answers (2)
  1. 25 June, 13:55
    0
    historical cost is $1,460,150

    Explanation:

    Computation of Cost of Land

    Cost $1,350,000

    Tear down $100,000

    Salvage - $8,500

    Legal fees $5,250

    Title insurance $3,600

    pavement $9,800

    Total $1,460,150
  2. 25 June, 15:02
    0
    Desert Company

    Historical cost of Land:

    Purchase price = $1,350,000

    Tearing down Buildings = $91,500 $ (100,000 - 8,500)

    Title Investigation = $5,250

    Title Insurance = $3,600

    Total = $1,450,350

    Explanation:

    The historical cost of land is the initial price paid to purchase the land and any other costs incurred in order to put the land to use, except building costs.

    The other costs, including Architect's fee, Liability Insurance during construction, excavation cost, contractor fee, and landscaping cost are costs incurred for the building and not for the land.
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