On December 1, 2017, Guinea Corp.purchased a tract of land as a factory site for $500,000.The old building on the property was razed, and salvaged materials resulting from demolition were sold.Additional costs incurred and salvage proceeds realized during December 2017 were as follows: On Guinea's December 31, 2017 balance sheet, what amount should be reported for the land?

Question

On December 1, 2017, Guinea Corp.purchased a tract of land as a factory site for $500,000.The old building on the property was razed, and salvaged materials resulting from demolition were sold.Additional costs incurred and salvage proceeds realized during December 2017 were as follows:  On Guinea's December 31, 2017 balance sheet, what amount should be reported for the land?

Quizplus · Accepted Answer

The cost of the land is the initial purchase price plus any additional costs incurred in getting the land ready for use. In this case, the initial purchase price was $500,000. Additional costs incurred during December were $16,000, bringing the total cost to $516,000. Salvage proceeds from the demolition were $18,000, which should be subtracted from the cost to arrive at the net amount. Therefore, the land should be reported at $534,000 ($516,000 - $18,000 = $534,000).