Question

On March 1, 2017, Boyd Company acquired real estate, on which it planned to construct a small office building, by paying $80,000 in cash. An old warehouse on the property was demolished at a cost of $8,200; the salvaged materials were sold for $1,700. Additional expenditures before construction began included $1,900 attorney’s fee for work concerning the land purchase, $5,200 real estate broker’s fee, $9,100 architect’s fee, and $14,000 to put in driveways and a parking lot.

(b) For each cost not used in determining the amount to be reported as the cost of the land, indicate the account to be debited below?

Answer 1

Answer:

The cost of land is $93,600

Explanation:

The computation of the cost of land is shown below:

= Cash payment + cost of property - salvage value + additional expenditure + attorney fee

= $80,000 + $8,200 - $1,700 + $1,900 + $5,200

= $93,600

The other cost would not be included in the land cost

So, the architect fee should be debited to the building account and the cost of driveways and parking lot should be debited to the land improvement cost

Answer 2

The amount to be reported as the cost of the land is $93,600 and  the account to be debited is: Building and equipment.

Cost of land

Using this formula

Cost of land= Cash payment + Property -Salvage value +Additional expenditure +Attorney fee

Let plug in the formula

Cost of land= $80,000 + $8,200 - $1,700 + $1,900 + $5,200

Cost of land= $93,600

Inconclusion the amount to be reported as the cost of the land is $93,600 and  the account to be debited is:  Building and equipment.

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