Question

On July 1, 2021, Larkin Co. purchased a $410,000 tract of land that is intended to be the site of a new office complex. Larkin incurred additional costs and realized salvage proceeds during 2021 as follows: Demolition of existing building on site $ 68,000 Legal and other fees to close escrow 12,800 Proceeds from sale of demolition scrap 8,300 What would be the balance in the land account as of December 31, 2021?

Answer 1

Answer:

$482,500

Explanation:

Cost of tract of land = $410,000

Additional costs;

Demolition of existing building = $68,000

Legal and other fees to close escrow = $12,800

Proceeds from sale of demolition scrap = $8,300

Net cost incurred on demolition = $68,000 - $8,300

                                                     = $59,700

Total cost to be capitalized = $410,000 + $12,800 + $59,700

                                             = $482,500

Balance in the land account as at December 31, 2021 is $482,500.