Question

Falcon Company acquired an adjacent lot to construct a new warehouse, paying $40,000 and giving a short-term note for $410,000. Legal fees paid were $13,275, delinquent taxes assessed were $14,500, and fees paid to remove an old building from the land were $15,800. Materials salvaged from the demolition of the building were sold for $6,800. A contractor was paid $890,000 to construct the new warehouse. What is the cost of the land to be reported on the balance sheet?

Answer 1

Answer:

cost of land on balance sheet is $486,775

Explanation:

given data

paying = $40,000

short-term note = $410,000

Legal fees paid = $13,275

delinquent taxes assessed = $14,500

fees paid remove old building = $15,800

sold = $6,800

contractor paid = $890,000

solution

we know here that

Initial cost of land is paying + short-term note

Initial cost of land = 40000 + 410000

Initial cost of land = $450000

and

total work cost = Legal fees paid + delinquent taxes assessed  + fees paid remove old building

total work cost = $13,275 + $14,500 + $15,800

total work cost = $43,575

so

cost of land on balance sheet is = Initial cost of land + total work cost - sold

cost of land on balance sheet is = $450000  + $43,575 - $6800

cost of land on balance sheet is $486775

and we know that amount paid to contractor is not consider here as cost of land