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

question 208

Multiple Choice

Merchant Company purchased property for a building site.The costs associated with the property were:
$$\begin{array} { l c } \text { Purchase price } & \$ 185,000 \\\text { Real estate commissions } & 15,000 \\\text { Legal fees } & 700 \\\text { Expenses of clearing the land } & 2,000 \\\text { Expenses to remove old building } & 4,000\end{array}$$
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:

Fungus

A kingdom of eukaryotic organisms that includes yeasts, molds, and mushrooms, which are distinct from plants, animals, and bacteria.

Helminth

Parasitic worms, including flukes, tapeworms, and roundworms, that can cause disease in humans.

Protozoan

A diverse group of single-celled eukaryotic organisms, many of which are parasitic.

Bacterium

A large domain of prokaryotic microorganisms, typically a few micrometers in length, that can exist as single cells or in clusters, and have various roles in the environment, medicine, and industry.