Robin Company acquires a piece of land on which it intends to build a factory to produce its primary product. The land is listed for sale at $460,000, but Robin Company's real estate broker is able to negotiate a sales price of $420,000. The land contains an old office building that is razed at a cost of $25,000 ($29,000 in costs less $4,000 proceeds from salvaged materials). Robin Company pays a commission to the real estate broker of $23,000 and an attorney's fee of $6,000. On its statement of financial position at December 31, 2014, what amount will Robin Company record as the cost of the land?

Question

Quizplus · Accepted Answer

The cost of the land will include the negotiated sales price of $420,000, the cost to raze the old office building of $25,000, and the commission and attorney's fee totaling $29,000 ($23,000 + $6,000). Therefore, the total cost of the land is $474,000.

Robin Company Acquires a Piece of Land on Which It