Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Textbook Question
Chapter 2, Problem 11PC
Costs to Be Included in Historical Cost Valuation. At a cost of $200,000, Assume In-N-Out Burger acquired a tract of land for a restaurant site. It paid attorneys $7,500 to conduct a title search and to prepare the required legal documents for the purchase. State real estate transfer taxes totaled $2,500. Building permits totaled $1,200. Compute the acquisition cost of the land.
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Fresh Veggies, Incorporated (FVI), purchases land and a warehouse for $490,000. In addition to the purchase price, FVI makes the
following expenditures related to the acquisition: broker's commission, $29,000; title insurance, $1,900; and miscellaneous closing
costs, $6,000. The warehouse is immediately demolished at a cost of $29,000 in anticipation of building a new warehouse.
Determine the cost of the land and record the purchase (assuming cash was paid for all expenditures). (If no entry is required for a
particular transaction/event, select "No Journal Entry Required" in the first account field.)
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Journal entry worksheet
Record the purchase of the land.
Note: Enter debits before credits.
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1
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Merchant Company purchased property for a building site. The costs associated with the property were:
Purchase price
Real estate commissions
Legal fees
Expenses of clearing the land
Expenses to remove old building
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?
Multiple Choice
$181,300 to Land; $20,800 to Building.
$196,800 to Land; $1,500 to Building.
$195,500 to Land; $5,300 to Building.
$199,300 to Land; $0 to Building.
$ 180,000
15,500
1,300
2,500
1,500
$200,800 to Land; $0 to Building.
$200,000, Assume In-N-Out Burger acquired a tract of land for a restaurant site. It paid attorneys$7,500 to conduct a title search and to prepare the required legal documents for the purchase.State real estate transfer taxes totaled $2,500. Building permits totaled $1,200. Computethe acquisition cost of the land.
Chapter 2 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 2 - Prob. 1QECh. 2 - Asset Valuation and Income Recognition. Asset...Ch. 2 - Trade-Offs among Acceptable Accounting...Ch. 2 - Income Flows versus Cash Flows. The text states,...Ch. 2 - Prob. 5QECh. 2 - Prob. 6QECh. 2 - Prob. 7QECh. 2 - Prob. 8QECh. 2 - Computation of Income Tax Expense. A firms income...Ch. 2 - Computation of Income Tax Expense. A firms income...
Ch. 2 - Costs to Be Included in Historical Cost Valuation....Ch. 2 - Effect of Valuation Method for Nonmonetary Asset...Ch. 2 - Prob. 13PCCh. 2 - Prob. 14PCCh. 2 - Prob. 15PCCh. 2 - Deferred Tax Assets. Components of the deferred...Ch. 2 - Interpreting Income Tax Disclosures. The financial...Ch. 2 - Interpreting Income Tax Disclosures. Prepaid Legal...Ch. 2 - Interpreting Income Tax Disclosures. The financial...Ch. 2 - Analyzing Transactions. Using the analytical...Ch. 2 - Prob. 21PCCh. 2 - Starbucks The financial statements of Starbucks...Ch. 2 - Prob. 1BICCh. 2 - Prob. 1CICCh. 2 - Prob. 1DICCh. 2 - Prob. 1EICCh. 2 - Prob. 1FICCh. 2 - Starbucks The financial statements of Starbucks...
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- Utica Corporation paid 360,000 to purchase land and a building. An appraisal showed that the land is worth 100,000 and the building is worth 300,000. What cost should Utica assign to the land and to the building, respectively?arrow_forwardMerchant Company purchased property for a building site. The costs associated with the property were: 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?arrow_forwardMerchant Company purchased property for a building site. The costs associated with the property were: Purchase price $ 191,000 Real estate commissions 16,600 Legal fees 2,400 Expenses of clearing the land Expenses to remove old building 3,600 2,600 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?arrow_forward
- Soccer Wholesale purchased land and a warehouse for one price of $850,000. In addition to the purchase price, Soccer Wholesale makes the following expenditures related to the acquisition: broker's commission, $44,400; title insurance, $2,800; and miscellaneous closing costs, $7,300. The warehouse is immediately demolished at a cost of $83,900 in anticipation of building a new warehouse. Determine the amount Soccer Wholesale should record as the cost of the land. Cost of the landarrow_forwardI need answer with proper wayarrow_forwardDenzararrow_forward
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- help mearrow_forwardQuestion: Zinski Co. paid $150,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $20,000, Building, $150,000, and Office furniture, $30,000. Based on this information the cost that would be allocated to the land isarrow_forwardFacetious Company incurred the following expenditures related to the construction of a new home office: Purchase price of land and an old apartment building 2,000,000 Fair value of land 1,800,000 Legal fees, including fee for title search 10,000 Payment of land mortgage and related interest due at time of sale 50,000 Payment of delinquent property taxes assumed 20,000 Cost of razing the apartment building 30,000 Grading and drainage on land site 15,000 Architect fee on new building 200,000 Payment to building contractor 8,000,000 Interest cost on specific borrowing during construction 300,000 Payment of medical bills of employees accidentally injured while inspecting building construction 10,000 Cost of paving driveway and parking lot 40,000 Cost of trees, shrubs and other landscaping 55,000 Cost of installing lights in parking lot 5,000 Premium for insurance on building during construction 25,000 Cost of open house party to celebrate opening of building 60,000 1. What is the cost…arrow_forward
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