A Company Purchased Land on Which to Construct a New

question 156

Essay

A company purchased land on which to construct a new building for a cost of $250,000. Additional costs incurred were: $$\begin{array} { | l | r | } \hline \text { Real estate broker's commissions } & \$ 15,000 \\\hline \text { Legal fees incurred in purchase of the real estate } & 2,500 \\\hline \text { Landscaping } & 10,000 \\\hline \text { Expenses to remove old house located on land } & 3,000 \\\hline \text { Proceeds from selling materials salvaged from old house } & 1,000 \\\hline\end{array}$$
What total dollar amount should be charged to Land and what amount should be charged to the new Building?

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Definitions:

Trading Securities

Trading securities are investments in debt or equity that a company plans to actively buy and sell to generate profit from short-term fluctuations in their prices.

Held To Maturity

An accounting classification for debt securities that a company intends and is able to hold until they mature.

Accrued Interest

Interest that has been incurred but not yet paid over a specified period, typically relating to bonds or loans.

Bond Interest Rate

The percentage of interest that bond issuers must pay to bondholders, typically expressed as an annual rate.