[jo13sue]

Fastball Delivery Company acquired an adjacent lot to construct a new warehouse, paying $29,000 and giving a short-term note for $296,000. Legal fees paid were $2,425, delinquent taxes assumed were $15,800, and fees paid to remove an old building from the land were $17,100. Materials salvaged from the demolition of the building were sold for $4,900. A contractor was paid $988,000 to construct a new warehouse.

Determine the cost of the land to be reported on the balance sheet.

[kcomissiong]

Sooo... go ahead. We'll let you know if you're right.

[lashanna88]

30,000 + 270,000 + 1,425 + 12,000 + 18,500 - 4,500 = 327,425

[nm_o]

Where did you get 30,000 from?

[pready]

The 30,000 should have been 29,000 and the rest of the numbers are wrong also.

It should be the price paid of 29,000 plus the short-term note of 296,000 plus the legal fees of 2,425 plus delinquent taxes of 15,800 plus fees for removing old building of 17,100 minus materials salvaged of 4,900.

[nm_o]

Ohh OK. I'm doing a similar question but just don't understand what is supposed to be added as the cost of the land and what should be subtracted. Thanks

[pready]

The cost of land is the purchase price plus any back taxes that have to be paid, plus any legal fees, plus costs to remove old buildings plus any other costs related to get the land ready for construction. The costs to be subtracted from the cost of land is any money you get from selling salvaged materials because you are receiving money, not spending it.

The costs related to constructing a new building will be for the cost of a building.