A company purchased land for $84,000 cash. real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. proceeds from salvage of the demolished building was $1,200. under the historical cost principle, the cost of land would be recorded at $94,800. $84,000. $89,800. $96,000.

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Business

Serena

21 August, 06:27

A company purchased land for $84,000 cash. real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. proceeds from salvage of the demolished building was $1,200. under the historical cost principle, the cost of land would be recorded at $94,800. $84,000. $89,800. $96,000.

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Kendall Austin · Answer 1

A historical cost is a measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company. Original cost is the total cost associated with the purchase of an asset. The original cost of an asset takes into consideration all of the costs that can be attributed to its purchase and to putting the asset to use. These costs can include such factors as the purchase price, commissions, transportation, appraisals, warranties and installation.

Therefore, under the historical cost principle, the cost of the land would be recorded as the cost of the purchase of the land plus broker's commission plus the amount spent for demolishing an old building on the land = $84,000 + $5,000 + $7,000 = $96,000