Merchant Company purchased property for a building site.The costs associated with the property were:
$$\begin{array} { l c }
\text { Purchase price } & \$ 185,000 \
\text { Real estate commissions } & 15,000 \
\text { Legal fees } & 700 \
\text { Expenses of clearing the land } & 2,000 \
\text { Expenses to remove old building } & 4,000
\end{array}$$
What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

Question

Merchant Company purchased property for a building site.The costs associated with the property were:
$$\begin{array} { l c } 
\text { Purchase price } & \$ 185,000 \
\text { Real estate commissions } & 15,000 \
\text { Legal fees } & 700 \
\text { Expenses of clearing the land } & 2,000 \
\text { Expenses to remove old building } & 4,000
\end{array}$$
What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

Quizplus · Accepted Answer

The cost of the land includes the purchase price, real estate commissions, legal fees, expenses of clearing the land, and expenses to remove the old building, totaling $206,700. There are no costs directly associated with the new building in the provided information.

Merchant Company Purchased Property for a Building Site What Portion of These Costs Should Be Allocated to the with the Property