On-Time Delivery Company acquired an adjacent lot to construct a new warehouse, paying $90,000 and giving a short-term note for $50,000. Legal fees paid were $1,750, delinquent taxes assumed were $25,000, and fees paid to remove an old building from the land were $9,000. Materials salvaged from the demolition of the building were sold for $1,000. A contractor was paid $415,000 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet.
Answer:
Initial cost of land ($90,000 + $50,000)........................... $140,000 Legal fees............................................................... $ 1,750 Delinquent taxes...................................................... 25,000 Demolition of building............................................. 9,000 35,750 Total costs to acquire and prepare land for use............... $175,750 Less salvage of materials............................................. 1,000 Cost of land to be reported on the balance sheet............ $174,750