The Reid Co. acquired a piece of land for a new factory paying $100,000. Reid demolished the old building at a cost of $20,000, and sold scrapped material salvaged from the old building for $5,000. The architect's fees were $25,000, and the title insurance upon acquisition of the land was $1,000. The construction period interest was $8,000, and the contractor received $300,000 for the building. A pavement assessment made by the city cost Reid $2,000 at the purchase date.
-The cost of the land recorded by Reid Co.is

Question

Quizplus · Accepted Answer

The cost of the land recorded by Reid Co. is $118,000, calculated as follows: Purchase price of the land ($100,000) + Demolition costs ($20,000) - Proceeds from scrapped material ($5,000) + Architect's fees ($25,000, which is a mistake; it should not be included in the land cost as it is related to the building) + Title insurance ($1,000) + Pavement assessment ($2,000) = $143,000. However, without including the architect's fees (which are incorrectly added here and should be associated with the building cost), the correct calculation should be: Purchase price ($100,000) + Demolition costs ($20,000) - Proceeds from scrapped material ($5,000) + Title insurance ($1,000) + Pavement assessment ($2,000) = $118,000. The construction period interest and the contractor's fee are related to the building, not the land.