Question

A company purchased land for $96200 cash. Real estate brokers' commission was $3300 and $7200 was spent for demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $1500. Under the historical cost principle, the cost of land would be recorded at
a. $96200.
b. $106700.
c. $105200.
d. $101900.

Answer 1

Answer:

c. $105200.

Explanation:

Cost of land = $96,200

Real estate brokers' commission = $3300

Cost of demolition of old building = $7200

Proceed from salvage of demolition = $1500

Cost of land to be recorded using historical cost principle

= $96,200 + $3300 + $7200 - $1500

= $105,200

Option c. $105200 is right.