Fresh n' Fit Cuisine purchased land and a building for $320,000 so that it could open a new restaurant.The building's fair market value at the time of purchase was $220,000.In addition,the following costs were incurred prior to the restaurant's opening: $\begin{array}{l}
\begin{array}{lll}
\text { Tranafer taxes } \
\text { Interest incurred on the mortgage loan taken out to make the purchase } \
\text { Attomey and real estate agent'sfees } \
\text { Repave the parkinglot } \
\end{array}
\begin{array}{lll}
\$ 10,000 \
4,000 \
15,000 \
6,000
\end{array}
\end{array}$ How much will be recorded as land improvements?

Question

Fresh n' Fit Cuisine purchased land and a building for $320,000 so that it could open a new restaurant.The building's fair market value at the time of purchase was $220,000.In addition,the following costs were incurred prior to the restaurant's opening: $\begin{array}{l}
\begin{array}{lll}
 \text { Tranafer taxes } \
 \text {  Interest incurred on the mortgage loan taken out to make the purchase   } \
 \text {  Attomey and real estate agent'sfees   } \
 \text {  Repave the parkinglot  } \
\end{array}
\begin{array}{lll}
\$ 10,000 \
4,000 \
15,000 \
6,000
\end{array}
\end{array}$ How much will be recorded as land improvements?

Quizplus · Accepted Answer

Land improvements refer to permanent modifications made to the land, such as the installation of driveways, parking lots, walkways, and landscaping. The costs listed in the question are not related to any of these improvements. Therefore, the answer would be none of the above. The cost of repaving the parking lot, however, is considered a land improvement, and it can be added to the initial cost of the land and building. Therefore, the correct answer is (B) $6,000.

Fresh N' Fit Cuisine Purchased Land and a Building for $320,000