Merchant Company Purchased Property for a Building Site What Portion of These Costs Should Be Allocated to the Associated

question 27

Multiple Choice

Merchant Company purchased property for a building site. The costs associated with the property were: $$\begin{array} { | l | r | } \hline \text { Purchase price } & \$ 185,000 \\\hline \text { Real estate commissions } & 15,000 \\\hline \text { Legal fees } & 700 \\\hline \text { Expenses of clearing the land } & 2,000 \\\hline \text { Expenses to remove old building } & 4,000 \\\hline\end{array}$$ What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

• A)$187,700 to Land; $19,000 to Building.
• B)$200,700 to Land; $6,000 to Building.
• C)$200,000 to Land; $6,700 to Building.
• D)$185,000 to Land; $21,700 to Building.
• E)$206,700 to Land; $0 to Building.

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Definitions:

Common Stock Account

An equity account on a company's balance sheet representing the amount of money that has been invested directly in the company by its shareholders in exchange for common stock.

$5 Par Value

A nominal or face value assigned to a share of stock, in this case, set at five dollars, used in certain financial calculations and legal paperwork.

$18 Per Share

A specific price value assigned to individual shares of stock, indicating the cost or value of a single share at a particular moment.

Treasury Stock

Shares that were once a part of the outstanding shares and have been repurchased by the company.