Question

Fresh Veggies, Inc (FVI), purchases land and a warehouse for $490,000. In addition to the purchase price, FVI makes thefollowing expenditures related to the acquisition: broker’s commission, $29,000; title insurance, $1,900; and miscellaneousclosing costs, $6,000. The warehouse is immediately demofished at a cost of $29,000 in anticipation of building a newwarehouse. Determine the amount FVI should record as the cost of the land.

Answer 1

Answer:

$555,900

Explanation:

Cost of land is every expenditure in getting ready the land for use.

Cost land = 490,000+29,000+1,900+6,000+29,000= $555,900

Answer 2

Answer:

$555,900

Explanation:

The cost of an item of asset comprises: the cost of purchase, net of any trade discounts plus any import duties and non-refundable sales taxes. any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Therefore in the case of Fresh Veggies, Inc (FVI) all costs incurred to bring the land to intended use will be considered as part of the value of the Land

Purchases................................ $490,000.

broker’s commission............... $29,000;

Title insurance............................. $1,900

Miscellaneous closing costs.... $6,000.

Demolishing cost...................... $29,000

TOTAL COST.............................$555,900