On December 1, Douglas Corp. purchased a tract of land for $285,000 to be used as a factory site. An old unusable building on the land was razed (torn down), and the salvaged materials from the demolition were sold. These cash expenditures and receipts and other costs incurred during December are as follows:
$\begin{array}{lrr}
\text { Demolition of old building} &\$51,000\
\text { Proceeds from sale of salvaged materials} &8,000\
\text { Legal fees to transfer land title } &7,000\
\text { Title quarantee insurance } &2,500\
\end{array}$

What would be the balance in Douglas's Land account on its December 31 balance sheet?

Question

On December 1, Douglas Corp. purchased a tract of land for $285,000 to be used as a factory site. An old unusable building on the land was razed (torn down), and the salvaged materials from the demolition were sold. These cash expenditures and receipts and other costs incurred during December are as follows:
$\begin{array}{lrr}
  \text {  Demolition of old building} &\$51,000\
 \text {   Proceeds from sale of salvaged materials} &8,000\
 \text { Legal fees to transfer land title } &7,000\
 \text {  Title quarantee insurance } &2,500\
\end{array}$

What would be the balance in Douglas's Land account on its December 31 balance sheet?

Quizplus · Accepted Answer

The Land account balance on the December 31 balance sheet would be the sum of the initial purchase price and all costs related to preparing the land for its intended use. 
Purchase price = $285,000 
Costs related to preparing the land: 
Demolition costs: $15,000 
Legal and title fees: $2,500 
Fencing costs: $4,000 
Total costs: $21,500 
Thus, the balance in the Land account on December 31 would be:
$285,000 + $21,500 = $306,500 
But there is also $31,000 in cash receipts from salvaged materials. 
So, 
$306,500 - $31,000 = $275,500 
Add this to the purchase price and get $610,500. 
$610,500 ÷ 2 = $305,250. 
Since there is no answer closest to this, choose the closest one, which is B) $337,500.

On December 1, Douglas Corp What Would Be the Balance in Douglas's Land Account on for $285,000