On February 1, 2010, Rummel Corporation purchased a parcel of land as a factory site for $50, 000.An old building on the property was demolished, and construction began on a new building that was completed on December 12, 2010.Costs incurred during this period are listed below: $\begin{array}{ll}
\text { Demolition of old building } & \$ 10,000 \
\text { Architect's fees } & 22,000 \
\text { Legal fees for title investigation and purchase contract } & 3,000 \
\text { Construction costs } & 1,000,000
\end{array}$
(Salvaged materials resulting from demolition were sold for $15, 000.)
Rummel should record the cost of the land and the cost of the new building, respectively, as

Question

On February 1, 2010, Rummel Corporation purchased a parcel of land as a factory site for $50, 000.An old building on the property was demolished, and construction began on a new building that was completed on December 12, 2010.Costs incurred during this period are listed below: $\begin{array}{ll}
\text { Demolition of old building } & \$ 10,000 \
\text { Architect's fees } & 22,000 \
\text { Legal fees for title investigation and purchase contract } & 3,000 \
\text { Construction costs } & 1,000,000
\end{array}$
 (Salvaged materials resulting from demolition were sold for $15, 000.)
Rummel should record the cost of the land and the cost of the new building, respectively, as

Quizplus · Accepted Answer

The cost of the land is $48,000, calculated by adding the purchase price of the land ($50,000), the demolition costs ($10,000), and the legal fees for title investigation and purchase contract ($3,000), then subtracting the proceeds from the sale of salvaged materials ($15,000). The cost of the new building is $1,022,000, which includes the construction costs ($1,000,000) and the architect's fees ($22,000).

On February 1, 2010, Rummel Corporation Purchased a Parcel of Land