A company purchased land for $120,000 cash; $7,000 was spent to demolish an old building on the land before construction of a new building could start; and $1,500 was received for material salvaged from the old building. The cost of the land would be recorded at

Question

Quizplus · Accepted Answer

The cost of the land includes the purchase price plus any costs necessary to prepare the land for its intended use. Therefore, the cost is $120,000 (purchase price) + $7,000 (demolition) - $1,500 (salvaged materials) = $125,500.

A Company Purchased Land for $120,000 Cash; $7,000 Was Spent