A restaurant chain purchases a two-acre tract of land and an existing building for $500,000. The company plans to remove the existing building and construct a new restaurant on the site. In addition to the purchase price, the company pays a sales commission of $30,000 to the real estate agent and title insurance of $3,000. They also pay $8,000 in property tax, which includes $6,000 of back taxes and $2,000 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor $50,000 to tear down the old building and remove it from the site. The chain is able to sell salvaged materials from the building for $5,000 and pays an additional $6,000 to level the land. Required: What is the cost of land to be capitalized (please show the itemized amounts and total)?
A restaurant chain purchases a two-acre tract of land and an existing building for $500,000. The company plans to remove the existing building and construct a new restaurant on the site. In addition to the purchase price, the company pays a sales commission of $30,000 to the real estate agent and title insurance of $3,000. They also pay $8,000 in property tax, which includes $6,000 of back taxes and $2,000 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor $50,000 to tear down the old building and remove it from the site. The chain is able to sell salvaged materials from the building for $5,000 and pays an additional $6,000 to level the land. Required: What is the cost of land to be capitalized (please show the itemized amounts and total)?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem #1:
A restaurant chain purchases a two-acre tract of land and an existing building for $500,000. The
company plans to remove the existing building and construct a new restaurant on the site. In addition
to the purchase price, the company pays a sales commission of $30,000 to the real estate agent and title
insurance of $3,000. They also pay $8,000 in property tax, which includes $6,000 of back taxes and
$2,000 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a
contractor $50,000 to tear down the old building and remove it from the site. The chain is able to sell
salvaged materials from the building for $5,000 and pays an additional $6,000 to level the land.
Required: What is the cost of land to be capitalized (please show the itemized amounts and total)?
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