A company purchased land for $84,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $1,200. Under the historical cost principle, the cost of land would be recorded at

Question

Quizplus · Accepted Answer

Under the historical cost principle, the cost of land includes the purchase price, broker's commission, and demolition costs less proceeds from salvage. Therefore, the cost of land would be $84,000 + $5,000 + $7,000 - $1,200 = $94,800.

A Company Purchased Land for $84,000 Cash