On February 1, 2019, Edwards Corporation purchased a parcel of land as a factory site for $100,000. It demolished an old building or he property and began construction on a new building that was completed on October 2, 2019. Costs incurred during this period are: Demolition of old building $ 8,000 Architect's fees 25,000 Legal fees for title investigation and purchase contract 4.000 Construction costs 650,000 Edwards sold salvaged materials resulting from the demolition for $2,000. Required: 1. At what amount should Edwards record the cost of the land and the new building, respectively? 2. NEXT LEVEL If management misclassified a portion of the building's cost as part of the cost of the land, what would be the effect

On February 1, 2019, Edwards Corporation purchased a parcel of land as a factory site for $100,000. It demolished an old building or he property and began construction on a new building that was completed on October 2, 2019. Costs incurred during this period are: Demolition of old building $ 8,000 Architect's fees 25,000 Legal fees for title investigation and purchase contract 4.000 Construction costs 650,000 Edwards sold salvaged materials resulting from the demolition for $2,000. Required: 1. At what amount should Edwards record the cost of the land and the new building, respectively? 2. NEXT LEVEL If management misclassified a portion of the building's cost as part of the cost of the land, what would be the effect

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: Edwards Corporation Land and Building Purchase**

**Background:**
On February 1, 2019, Edwards Corporation purchased a parcel of land intended for a factory site at a cost of $100,000. Subsequent to the purchase, the company demolished an old building on the property and initiated the construction of a new building, which was completed on October 2, 2019. The expenses incurred during this period are detailed below:

**Cost Breakdown:**
- **Demolition of old building:** $8,000
- **Architect's fees:** $25,000
- **Legal fees for title investigation and purchase contract:** $4,000
- **Construction costs:** $650,000

Edwards profited from the sale of salvaged materials obtained from the demolition, earning $2,000.

**Requirements:**
1. **Cost Recording:** Determine the amount at which Edwards should record the cost of the land and the new building.
2. **NEXT LEVEL Analysis:** Examine the potential impact on the financial statements if management misclassified a portion of the building's cost as a part of the land cost.

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