SportsWorld purchased property for a building site. The costs associated with the property were: $$\begin{array} { | l | r | }
\hline \text { Purchase Price } & \$ 175,000 \
\hline \text { Real Estate Commissions } & \$ 15,000 \
\hline \text { Legal Fees } & \$ 800 \
\hline \text { Expense of clearimg land } & \$ 2,000 \
\hline \text { Expense to remove old building } & \$ 1,000 \
\hline
\end{array}$$ What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

Question

SportsWorld purchased property for a building site. The costs associated with the property were: $$\begin{array} { | l | r | } 
\hline \text { Purchase Price } & \$ 175,000 \
\hline \text { Real Estate Commissions } & \$ 15,000 \
\hline \text { Legal Fees } & \$ 800 \
\hline \text { Expense of clearimg land } & \$ 2,000 \
\hline \text { Expense to remove old building } & \$ 1,000 \
\hline
\end{array}$$ What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

Quizplus · Accepted Answer

All costs associated with acquiring the land and preparing it for use, including purchase price, commissions, legal fees, clearing, and removing old buildings, are allocated to the land.

SportsWorld Purchased Property for a Building Site What Portion of These Costs Should Be Allocated to the with the Property