Cost of Land Acquisition for Soccer Wholesale
What is the total cost of the land acquisition for Soccer Wholesale?
Can you calculate the amount Soccer Wholesale should report as the cost of the land?
The cost of the land for Soccer Wholesale is $760,000.
Soccer Wholesale should report the cost of the land as $760,000. Here's a step-by-step explanation:
The cost of the land for Soccer Wholesale is $760,000. This includes the initial purchase price of the land and warehouse, as well as any additional expenditures directly related to the acquisition. The cost of demolishing the warehouse should be treated separately and not included in the cost of the land.
Soccer Wholesale purchased land and a warehouse for one price of $760,000. In addition to the purchase price, Soccer Wholesale made the following expenditures related to the acquisition:
- Commission to sales agent: $43,000
- Title insurance: $3,200
- Miscellaneous closing costs: $6,900
These expenditures are considered part of the acquisition cost and should be added to the purchase price:
$760,000 + $43,000 + $3,200 + $6,900 = $813,100
The cost of demolishing the warehouse ($85,900) is not included in the cost of the land. It is an expense incurred in anticipation of building a new warehouse and should be treated separately.
Therefore, the amount Soccer Wholesale should report as the cost of the land is $760,000.
In summary, the cost of the land for Soccer Wholesale is $760,000. This includes the initial purchase price of the land and warehouse, as well as any additional expenditures directly related to the acquisition. The cost of demolishing the warehouse should be treated separately and not included in the cost of the land.