Wilshire Company purchased land for $120,000.The cost to demolish the existing building and prepare the land for a new building was $16,000.The real estate commission paid to buy the land was $7,200.What amount should be recorded in Wilshire's accounting records for the cost of the land?

Question

Quizplus · Accepted Answer

All reasonable and necessary costs to acquire a tangible asset and prepare it for use are included in the cost of the asset.For Wilshire Company,this amount is equal to the cost of the land of $120,000 plus the cost to demolish the existing building of $16,000 plus the real estate commission on the purchase of $7,200 = $143,200.

Wilshire Company Purchased Land for $120,000