Yani Company purchased land for $ 115,000 with the intentions of constructing a new operating facility. The land purchase included a dilapidated building that was removed at a cost of $ 16,000. The only salvage value from this old building was some materials which were sold for proceeds of $ 4,000. Yani had paid surveying costs of $ 1,800 and legal fees related to land transfer of $ 6,700. The new building was quickly constructed at a total cost of $ 422,000. Permits on the construction of this new facility totalled $ 18,000. Insurance premiums of $ 9,200 are paid annually. The production manager is currently on-site facilitating the production startup. This manager is an annual salary of $ 85,000. What capital cost is assigned to the new building?

Question

Quizplus · Accepted Answer

The capital cost of the new building is the sum of the land cost, the cost of removing the old building, the surveying costs, the legal fees, the construction costs, and the permits. The land cost is $115,000. The cost of removing the old building is $16,000. The surveying costs are $1,800. The legal fees are $6,700. The construction costs are $422,000. The permits are $18,000. The total capital cost of the new building is $115,000 + $16,000 + $1,800 + $6,700 + $422,000 + $18,000 = $440,000.

Yani Company Purchased Land for $ 115,000 with the Intentions