In December 2018,Ami,the Owner of Elm,paid for a Parcel of Land

question 10

Multiple Choice

In December 2018,Ami,the owner of Elm,paid for a parcel of land along with a warehouse on behalf of Elm,the registered owner of the property,for a total cost of $700,000.Ami also paid a real estate commission of $35,000 and legal fees of $5,000 in connection with this purchase,plus $25,000 for the demolition of the warehouse.Elm will reimburse Ami for these costs in January 2019 and will begin construction of an office building on this land.Prior to the purchase,the land and warehouse were appraised at $500,000 and $200,000,respectively.How much should be capitalized to the value of the land in 2018?

• A)$0
• B)$505,000
• C)$730,000
• D)$765,000

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Definitions:

Credit Balance

Credit Balance refers to the amount of money a company owes to its customers, creditors, or depositors in their respective accounts.

Credits

Accounting entries that decrease assets or increase liabilities and equity on the balance sheet.

Debits

In accounting, debits are entries on the left side of an account ledger, indicating increases in asset or expense accounts, or decreases in liability, equity, or revenue accounts.

Credit

An accounting entry that represents an increase in liabilities or equity or a decrease in assets, opposite of a debit.