Question

Previn Brothers Inc. purchased land at a price of \(27,000. Closing costs were \)1,400. An old building was removed at a cost of $10,200. What amount should be recorded as the cost of the land?

Short answer

$38,600

Step-by-step solution

Removing of building

Removing of building is the removing of unnecessary items attached with the land and make the land ready for the use.

Calculation of cost of land

$\begin{array}{rcl}\mathbf{CostofLand}& \mathbf{=}& \mathbf{PurchasePrice}\mathbf{+}\mathbf{ClosingCost}\mathbf{+}\mathbf{RemovalofBuidling}\\ & \mathbf{=}& \mathbf{\$}\mathbf{27}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{400}\mathbf{+}\mathbf{\$}\mathbf{10}\mathbf{,}\mathbf{200}\\ & \mathbf{=}& \mathbf{\$}\mathbf{38}\mathbf{,}\mathbf{600}\\ & & \end{array}$