Question

Wilson Co. purchased land as a factory site for $900,000. Wilson paid $80,000 to tear down two buildings on the land. Salvage was sold for $5,400. Legal fees of $3,480 were paid for title investigation and making the purchase. Architect's fees were $31,200. Title insurance cost $2,400, and liability insurance during construction cost $2,600. Excavation cost $10,440. The contractor was paid $2,800,000. An assessment made by the city for pavement was $6,400. Interest costs during construction were $170,000.

The cost of the land that should be recorded by Wilson Co. is
a. $989,880
b. $980,480
c $996,280
d. $986,880

The cost of the building should be recorded by Wilson Co. is

a. 2,804,840
b. 2,813,200
c. 2,803,800
d. 3,014,240

Answer 1

Answer:

Cost of the land = $980,480 (B)

Cost of Building = $ 3,014,240 (D)

Explanation:

Cost of the Land :                                     $                        

Cost of factory site                            900,000

Cost of dismantling the building       80,000

Proceeds from salvage sold              (5,400)

Title Insurance Cost                            2400

Legal fees for title investigation         3,480

                                                            980,480

                                                           

Cost of the Building :

Payment to Contractor                     2,800,000

Architect's fee                                   31,200

Liability Insurance cost                      2,600

Excavation cost                                  10,440

Interest cost                                      170,000

                                                          3,014,240