On December 1, 2020, Guinea Corp. purchased a tract of land as a factory site for $ 500,000. The old building on the property was razed, and salvaged materials resulting from demolition were sold. Additional costs incurred and salvage proceeds realized during December 2020 were as follows: Cost to raze old building .......................................$25,000
Legel fees for purchese contrect and to record ownership.............................5,000
Property purchase tax........................................................................8,000
Proceeds from sole of solvaged materials.........................................4,000 On Guinea's December 31, 2020 balance sheet, what amount should be reported for the land?

Question

Quizplus · Accepted Answer

The cost of the land should include the initial purchase price and all additional costs necessary to get the land ready for its intended use. In this case, we need to add up the purchase price, legal fees, and property purchase tax:

$500,000 + $5,000 + $8,000 = $513,000

We also need to subtract the proceeds from the sale of salvaged materials, which reduces the total cost of acquiring the land:

$513,000 - $4,000 = $509,000

Finally, we need to add the cost to raze the old building, which is a cost incurred to get the land ready for its intended use as a factory site:

$509,000 + $25,000 = $534,000

Therefore, the answer is C) $534,000.