Monterey Developers Purchases 10 Acres of Land for $15,000 on January

question 12

Multiple Choice

Monterey Developers purchases 10 acres of land for $15,000 on January 14, 2018. They also pay $2,000 in legal and other fees related to the purchase. Monterey spends $3,000 for legal fees, permit licenses, and city franchise fees to subdivide the land into 10 one-acre plots. Sewer and utility line easements cost an additional $5,000. Interest paid on the loan that financed the purchase is $1,200 for 2018. Monterey also pays $800 in property taxes in 2018. What is Monterey's adjusted basis in the land at the end of 2018?

• A)$17,000
• B)$25,000
• C)$25,800
• D)$26,200
• E)$27,000

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Definitions:

Standard Costing System

A cost accounting method that assigns expected costs to each unit of product to help managers monitor performance.

Direct Labour Hours

The total hours worked by employees directly involved in the manufacturing process or providing a service.

Standard Overhead Rate

The rate at which indirect costs are allocated to products or services based on a pre-determined basis, such as labor hours or machine hours.

Direct Labour Hour

A measure of the amount of time workers spend on a specific task, directly involved in the production of goods or services.