Nyguen Company bought real estate, on which there was an old office building, for $700,000. They paid $90,000 in cash as a down payment and signed a 6% mortgage for the remainder. They immediately had the old building razed at a net cost of $30,000, the salvaged materials were sold for $4,200. Attorneys were paid $7,000 in connection with the land purchase and an additional $3,000 in connection with permits and zoning variances necessary for Nyguen's new office building. $25,000 was paid for excavation for the basement of the new building. $2,400,000 was paid for construction of the new building, and $95,000 was paid for a parking lot and necessary walkways and driveways. The new office building should be recorded at:
A) $2,400,000.
B) $2,428,000.
C) $2,425,000.
D) $2,400,000

Question

Quizplus · Accepted Answer

The new office building should be recorded at $2,428,000. This includes the construction cost of $2,400,000 plus the excavation cost for the basement of the new building ($25,000), as these costs are directly attributable to the construction of the building. The costs for razing the old building, attorneys' fees, and the cost for the parking lot and walkways are not included in the building's cost.

Nyguen Company Bought Real Estate, on Which There Was an Old