On July 1, 2018, Larkin Co. purchased a $400,000 tract of land that is intended to be the site of a new office complex. Larkin incurred additional costs and realized salvage proceeds during 2018 as follows:Demolition of existing building on site $75,000Legal and other fees to close escrow 12,000Proceeds from sale of demolition scrap 10,000What would be the balance in the land account as of December 31, 2018? a. $400,000. b. $475,000. c. $477,000. d. $487,000

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Business

Cayden Chavez

13 September, 07:21

On July 1, 2018, Larkin Co. purchased a $400,000 tract of land that is intended to be the site of a new office complex. Larkin incurred additional costs and realized salvage proceeds during 2018 as follows:Demolition of existing building on site $75,000Legal and other fees to close escrow 12,000Proceeds from sale of demolition scrap 10,000What would be the balance in the land account as of December 31, 2018? a. $400,000. b. $475,000. c. $477,000. d. $487,000

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Gage Miller · Answer 1

Answer:C. $477,000

Explanation:

Asset are initially recognized at price and other attributable cost. The cost includes tax paid on the assets e. g Vat, legal cost for attorney, delivery, installation, site preparation, professional fees e. g Architect. All income earned from testing the asset or incidental to the asset installation are deducted to arrive at a final cost value.

In the above scenario the price of the land $400,000 is added to demolition cost $75,000, plus the legal fees of $12,000 are all added to $487,000 and the proceed of $10,000 from sales of demolition scrap will be deducted to have a final cost of $477,000.