Extra 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. Extra 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. Architectural drawings and permits on the construction of this new facility totaled $ 18,000 and $ 10,650 respectively. Insurance premiums of $ 9,200 are paid annually. The production manager is currently on-site facilitating the production start-up. This manager has an annual salary of $ 85,000.
Instructions
a) Calculate the acquisition cost of the land. Identify each element of cost clearly.
b) Calculate the acquisition cost of the new building. Identify each element of cost clearly.

Question

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The Answer of Extra 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. Extra 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. Architectural drawings and permits on the construction of this new facility totaled $ 18,000 and $ 10,650 respectively. Insurance premiums of $ 9,200 are paid annually. The production manager is currently on-site facilitating the production start-up. This manager has an annual salary of $ 85,000.
Instructions
a) Calculate the acquisition cost of the land. Identify each element of cost clearly.
b) Calculate the acquisition cost of the new building. Identify each element of cost clearly.

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