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

question 78

Multiple Choice

Merchant Company purchased property for a building site. The costs associated with the property were: $\begin{array}{lr}\text { Purchase price } & \$ 185,000 \\\text { Real estate commissions } & 15,000 \\\text { Legal fees } & 700 \\\text { Expenses of clearing the land } & 2,000 \\\text { Expenses to remove old building } & 4,000\end{array}$
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) $200,000 to Land; $6,700 to Building.
• B) $185,000 to Land; $21,700 to Building.
• C) $200,700 to Land; $6,000 to Building.
• D) $206,700 to Land; $0 to Building.
• E) $187,700 to Land; $19,000 to Building.

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