Cowboy Development incurred the following costs associated with the purchase of a piece of land that it will use to re-build an office building: What amount should be recorded for the purchase of the land?
$$\begin{array} { | l | r | }
\hline \text { Sale price of the land } & \$ 400,000 \
\hline \text { Sale of salwaged parts already on land } & \$ 20,000 \
\hline \text { Demolition of the old building } & \$ 30,000 \
\hline \text { Ground breaking ceremony (food and supplies) } & \$ 1,500 \
\hline \text { Land preparation and leveling } & \$ 7,500 \
\hline
\end{array}$$

Question

Cowboy Development incurred the following costs associated with the purchase of a piece of land that it will use to re-build an office building: What amount should be recorded for the purchase of the land?
$$\begin{array} { | l | r | } 
\hline \text { Sale price of the land } & \$ 400,000 \
\hline \text { Sale of salwaged parts already on land } & \$ 20,000 \
\hline \text { Demolition of the old building } & \$ 30,000 \
\hline \text { Ground breaking ceremony (food and supplies) } & \$ 1,500 \
\hline \text { Land preparation and leveling } & \$ 7,500 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The cost of the land should include the sale price, demolition, and land preparation costs, minus the sale of salvaged parts. Thus, $400,000 + $30,000 + $7,500 - $20,000 = $417,500. The groundbreaking ceremony is not included in the land cost.

Cowboy Development Incurred the Following Costs Associated with the Purchase