The Reid Co. acquired a piece of land for a new factory paying $100,000. Reid demolished the old building at a cost of $20,000, and sold scrapped material salvaged from the old building for $5,000. The architect's fees were $25,000, and the title insurance upon acquisition of the land was $1,000. The construction period interest was $8,000, and the contractor received $300,000 for the building. A pavement assessment made by the city cost Reid $2,000 at the purchase date. The cost of the building recorded by Reid Co. is:

A) $100,000

B) $115,000

C) $116,000

D) $118,00030

Question

Business

Alfred Larsen

12 September, 03:49

The Reid Co. acquired a piece of land for a new factory paying $100,000. Reid demolished the old building at a cost of $20,000, and sold scrapped material salvaged from the old building for $5,000. The architect's fees were $25,000, and the title insurance upon acquisition of the land was $1,000. The construction period interest was $8,000, and the contractor received $300,000 for the building. A pavement assessment made by the city cost Reid $2,000 at the purchase date. The cost of the building recorded by Reid Co. is:

A) $100,000

B) $115,000

C) $116,000

D) $118,00030

+5

Answers (1)

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Lennon · Answer 1

The cost of the building recorded by Reid Co. is $100,000

Explanation:

Under Generally Accepted Accounting Principles (GAAP) all acquisition of a fixed asset should be recorded at the cost in which it was purchased, that because the historical cost method is used. Therefore the land should be recorded in the accounting records of The Reid Co. at its purchase value ($100,000).