**Question: Acquisition Cost Calculation**On January 1, Coopers Industries bought a parcel of land for use in its operations by paying the seller $100,000 in cash and signing a 5-year, 12 percent note payable in the amount of $400,000. In connection with the purchase of the land, Coopers incurred legal fees of $19,000, a real estate agent sales commission of $25,000, surveying fees of $1,000, and an appraisal fee of $5,000. **Options: The acquisition cost of the land is:**- ○ $131,000- ○ $150,000- ○ $531,000- ○ $550,000**Explanation:**To determine the acquisition cost of the land, sum the purchase price, the note payable, and all incurred fees:- Cash payment: $100,000- Note payable: $400,000- Legal fees: $19,000- Real estate commission: $25,000- Surveying fees: $1,000- Appraisal fees: $5,000Total acquisition cost = $100,000 + $400,000 + $19,000 + $25,000 + $1,000 + $5,000 = $550,000Thus, the correct answer is $550,000.

A phrase used in accounting for assets and property that might not be easily turned into cash is "fixed asset," also known as "long-lived assets," "property, plant, and equipment." Due to the liquid nature of current assets like cash and bank accounts, fixed assets are distinct from these.Calculation of acquisition cost of the land: Acquisition cost of the land=Cash+Notes Payable+Legal Fees+Sales commission+Survering fees+Appraisal Fee=$100,000+$400,000+$19,000+$25,000+$1,000+$5,000=$550,000 Therefore, acquisition cost of the land is $550,000. Hence, Option 4 is correct.

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On January 1 Coopers Industries bought a parcel of land for use in its operations by paying the seller $100,000 in cash and signing a 5-year, 12 percent note payable in the amount of $400,000. In connection with the purchase of the land, Coopers incurred legal fees of $19,000, a real estate agent sales commission of $25,000, surveying fees of $1,000, and an appraisal fee of $5,000. The acquisition cost of the land is $131,000 $150,000 $531,000 $550,000

On January 1 Coopers Industries bought a parcel of land for use in its operations by paying the seller $100,000 in cash and signing a 5-year, 12 percent note payable in the amount of $400,000. In connection with the purchase of the land, Coopers incurred legal fees of $19,000, a real estate agent sales commission of $25,000, surveying fees of $1,000, and an appraisal fee of $5,000. The acquisition cost of the land is $131,000 $150,000 $531,000 $550,000

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter9: Acquisitions Of Property

Section: Chapter Questions

Problem 42P

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