Shaffer Company acquires land for $62,000 cash. Additional costs are as follows. $$\begin{array} { l r }
\text { Removal of shed } & \$ 300 \
\text { Filling and grading } & 1,500 \
\text { Salvage value of lumber of shed } & 120 \
\text { Broker commission } & 1,130 \
\text { Paving of parking lot } & 10,000 \
\text { Closing costs } & 560
\end{array}$$ Shaffer will record the acquisition cost of the land as
A) $62,000.
B) $63,690.
C) $65,610.
D) $65,370.

Question

Shaffer Company acquires land for $62,000 cash. Additional costs are as follows. $$\begin{array} { l r } 
\text { Removal of shed } & \$ 300 \
\text { Filling and grading } & 1,500 \
\text { Salvage value of lumber of shed } & 120 \
\text { Broker commission } & 1,130 \
\text { Paving of parking lot } & 10,000 \
\text { Closing costs } & 560
\end{array}$$ Shaffer will record the acquisition cost of the land as
A) $62,000.
B) $63,690.
C) $65,610.
D) $65,370.

Quizplus · Accepted Answer

The acquisition cost of the land includes all costs necessary to prepare the land for its intended use. This includes the purchase price ($62,000), removal of shed ($300), filling and grading ($1,500), broker commission ($1,130), and closing costs ($560). The salvage value of the shed ($120) is subtracted. The paving of the parking lot is not included as it is a land improvement. Total: $62,000 + $300 + $1,500 + $1,130 + $560 - $120 = $65,370.

Shaffer Company Acquires Land for $62,000 Cash Shaffer Will Record the Acquisition Cost of the Land as as Follows