Ramirez Company acquires land for $240,000 cash. Additional costs are as follow. $$\begin{array} { l r }
\text { Removal of shed } & \$ 2,000 \
\text { Filling and grading } & 6,000 \
\text { Salvage value of lumber of shed } & 1,280 \
\text { Broker commission } & 4,520 \
\text { Paving of parking lot } & 40,000 \
\text { Closing costs } & 3,400
\end{array}$$ Ramirez will record the acquisition cost of the land as

Question

Ramirez Company acquires land for $240,000 cash. Additional costs are as follow. $$\begin{array} { l r } 
\text { Removal of shed } & \$ 2,000 \
\text { Filling and grading } & 6,000 \
\text { Salvage value of lumber of shed } & 1,280 \
\text { Broker commission } & 4,520 \
\text { Paving of parking lot } & 40,000 \
\text { Closing costs } & 3,400
\end{array}$$ Ramirez will record the acquisition cost of the land as

Quizplus · Accepted Answer

The acquisition cost of the land includes the purchase price and all costs necessary to make it ready for its intended use. This includes the removal of the shed ($2,000), filling and grading ($6,000), broker commission ($4,520), and closing costs ($3,400). The salvage value of the shed ($1,280) is subtracted. The paving of the parking lot is not included as it is a land improvement. Therefore, the total cost is $240,000 + $2,000 + $6,000 + $4,520 + $3,400 - $1,280 = $254,640.

Ramirez Company Acquires Land for $240,000 Cash Ramirez Will Record the Acquisition Cost of the Land as as Follow