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Brummel Company plans to develop a shopping center. In the first quarter, the following amounts were incurred: Acquisition of land $53,000 1,100 Lawn sprinkler system Surveys and legal fees 1,000 Land clearing 800 Fencing 6,300 Install lighting and signage 1,200 Parking lot 2,700 What amount should be recorded as the cost of the land in the company's books? O $54,800 $54,000 $63,400 $66,100

Brummel Company plans to develop a shopping center. In the first quarter, the following amounts were incurred: Acquisition of land $53,000 1,100 Lawn sprinkler system Surveys and legal fees 1,000 Land clearing 800 Fencing 6,300 Install lighting and signage 1,200 Parking lot 2,700 What amount should be recorded as the cost of the land in the company's books? O $54,800 $54,000 $63,400 $66,100

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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**Case Study: Brummel Company's Land Development Costs** **Introduction:** Brummel Company is undertaking the development of a new shopping center. During the first quarter, they incurred several costs related to this project. Below is a breakdown of the expenses: **Cost Breakdown:** 1. **Acquisition of land:** $53,000 2. **Lawn sprinkler system:** $1,100 3. **Surveys and legal fees:** $1,000 4. **Land clearing:** $800 5. **Fencing:** $6,300 6. **Install lighting and signage:** $1,200 7. **Parking lot:** $2,700 **Question:** What amount should be recorded as the cost of the land in the company's books? **Options:** - $54,800 - $54,000 - $63,400 - $66,100 **Analysis:** To determine the correct amount to be recorded as the cost of the land, consider which expenses are directly related to making the land ready for its intended use. Typically, costs like the acquisition of land, surveys, legal fees, and land clearing are included in the capitalization of land. **Answer:** $54,800 (Acquisition, Surveys and legal fees, and Land clearing: $53,000 + $1,000 + $800).
Transcribed Image Text:**Case Study: Brummel Company's Land Development Costs** **Introduction:** Brummel Company is undertaking the development of a new shopping center. During the first quarter, they incurred several costs related to this project. Below is a breakdown of the expenses: **Cost Breakdown:** 1. **Acquisition of land:** $53,000 2. **Lawn sprinkler system:** $1,100 3. **Surveys and legal fees:** $1,000 4. **Land clearing:** $800 5. **Fencing:** $6,300 6. **Install lighting and signage:** $1,200 7. **Parking lot:** $2,700 **Question:** What amount should be recorded as the cost of the land in the company's books? **Options:** - $54,800 - $54,000 - $63,400 - $66,100 **Analysis:** To determine the correct amount to be recorded as the cost of the land, consider which expenses are directly related to making the land ready for its intended use. Typically, costs like the acquisition of land, surveys, legal fees, and land clearing are included in the capitalization of land. **Answer:** $54,800 (Acquisition, Surveys and legal fees, and Land clearing: $53,000 + $1,000 + $800).
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