A Company Purchased Land on Which to Construct a New

question 138

Essay

A company purchased land on which to construct a new building for a cost of $250,000.Additional costs incurred were:
$$\begin{array} { | l | r | } \hline \text { Real estate broker's commissions } & \$ 1 5 , 0 0 0 \\\hline \text { Legal fees incurted in purchase of the real estate } & 2 , 5 0 0 \\\hline \text { Landscaping } & 10,000 \\\hline \text { Expenses to remove old house located on land } & 3 , 0 0 0 \\\hline \text { Proceeds from selling materials salvaged from old house } & 1,000\\\hline\end{array}$$
What total dollar amount should be charged to Land and what amount should be charged to the new Building?

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Definitions:

Current Position Analysis

The evaluation of a company’s ability to pay its current liabilities.

Short-Term Creditors

Entities or individuals who have provided financial credit to a company with the expectation of being repaid within a short period, usually within a year.

Comparative Financial Statements

Financial statements that present the financial position, results of operations, and cash flows of an entity for multiple periods side-by-side for comparison.

Financial Statements

Financial statements are comprehensive reports created to provide insights into a company's financial performance, position, cash flows, and changes in equity over a specific period, typically including the balance sheet, income statement, statement of cash flows, and statement of changes in equity.