Early in 2022, Desert, Co. finalized plans to expand operations. The first stage was completed on January 19th with the purchase of a tract of land to be used as the location for their new office complex. The land and existing building were purchased for $750,000, paying cash. Title search, title insurance, back property taxes and other closing costs totaling $20,000 were paid at closing. During February, the old building was demolished at a cost of $70,000, and an additional $50,000 was paid to clear and grade the land. Salvaged materials from the demolished building were sold for proceeds of $10,000 Construction of the new office complex began on March 1 and was completed on November 30, 2022. Construction expenditures paid to sub-contractors were made as follows: March 1 June 1 Sept 1 Nov 1 $ 900,000 $1,200,000 $1,500,000 $1,800,000 Desert borrowed a $2,000,000, 8%, 2-year note on February 1st to help finance construction. Interest will be paid annually. The company's only other outstanding debt during all of 2022 was a $3,100,000, 9%, 10-year note payable. In December, the company purchased equipment and furniture for a lump-sum price of $500,000. The fair values of the equipment and furniture were $455,000 and $245,000, respectively. Given this information, determine the Historical Cost of the Land.
Early in 2022, Desert, Co. finalized plans to expand operations. The first stage was completed on January 19th with the purchase of a tract of land to be used as the location for their new office complex. The land and existing building were purchased for $750,000, paying cash. Title search, title insurance, back property taxes and other closing costs totaling $20,000 were paid at closing. During February, the old building was demolished at a cost of $70,000, and an additional $50,000 was paid to clear and grade the land. Salvaged materials from the demolished building were sold for proceeds of $10,000 Construction of the new office complex began on March 1 and was completed on November 30, 2022. Construction expenditures paid to sub-contractors were made as follows: March 1 June 1 Sept 1 Nov 1 $ 900,000 $1,200,000 $1,500,000 $1,800,000 Desert borrowed a $2,000,000, 8%, 2-year note on February 1st to help finance construction. Interest will be paid annually. The company's only other outstanding debt during all of 2022 was a $3,100,000, 9%, 10-year note payable. In December, the company purchased equipment and furniture for a lump-sum price of $500,000. The fair values of the equipment and furniture were $455,000 and $245,000, respectively. Given this information, determine the Historical Cost of the Land.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Early in 2022, Desert, Co. finalized plans to expand operations. The first stage was completed on
January 19th with the purchase of a tract of land to be used as the location for their new office
complex. The land and existing building were purchased for $750,000, paying cash. Title search,
title insurance, back property taxes and other closing costs totaling $20,000 were paid at closing.
During February, the old building was demolished at a cost of $70,000, and an additional $50,000
was paid to clear and grade the land. Salvaged materials from the demolished building were sold
for proceeds of $10,000 Construction of the new office complex began on March 1 and was
completed on November 30, 2022. Construction expenditures paid to sub-contractors were made
as follows:
March 1
June 1
Sept 1
Nov 1
$ 900,000
$1,200,000
$1,500,000
$1,800,000
Desert borrowed a $2,000,000, 8%, 2-year note on February 1st to help finance construction.
Interest will be paid annually. The company's only other outstanding debt during all of 2022 was a
$3,100,000, 9%, 10-year note payable.
In December, the company purchased equipment and furniture for a lump-sum price of $500,000.
The fair values of the equipment and furniture were $455,000 and $245,000, respectively.
Given this information, determine the Historical Cost of the Land.
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