EX 10-3 Determining cost of land

Intermountain Delivery Company acquired an adjacent lot to construct a new warehouse, paying $100,000 and giving a short-term note for $700,000. Legal fees paid were $5,000, delinquent taxes assumed were $18,500, and fees paid to remove an old building from the land were $12,000. Materials salvaged from the demolition of the building were sold for $4,000. A contractor was paid $950,000 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet.


Answer:

Initial cost of land ($100,000 + $700,000) ...................................... $800,000
Plus: Legal fees ........................................................................... $ 5,000
Delinquent taxes ............................................................... 18,500
Demolition of building ..................................................................... 12,000 35,500
$835,500
Less salvage of materials ............................................................... 4,000
Cost of land....................................................................................... $831,500