Question

Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen also paid an additional $15,000 to modify the building in order to accommodate his business needs. Wen should record the cost of the building at:

Answer 1

Answer:

$235,000

Explanation:

A company can capitalize the cost of assets, delivery cost, legal & documentation charge and any other directly attributable cost that is incurred to bring the asset in the condition as intended by management.

Therefore, cost of asset, title fee and building modification fee shall be added in the cost of asset as follows:

Cost of Asset                           200,000

Lawyer and title fee                   20,000

Building Accommodation           15,000

Total                                          235,000

Answer 2

If Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen should record the cost of the building at: $235,000.

Using this formula

Cost of building=Value of building+ Title feeds+ Additional cost

Where:

Value of building=$200,000

Title fees=$20,000

Additional cost=$15,000

Let plug in the formula

Cost of building=$200,000+$20,000+$15,000

Cost of building=$235,000

Inconclusion if Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen should record the cost of the building at: $235,000.

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