How much should Fresh Veggies, Incorporated record as the cost of the land?
What is the total cost of the land for Fresh Veggies, Incorporated?
Given information:
- Price of land and a warehouse = $590,000
- Broker's commission = $39,000
- Title insurance = $2,900
- Miscellaneous closing costs = $7,800
- Cost of demolishing the warehouse = $39,000
What is the formula to calculate the cost of the land?
Cost of the land = Price of land and a warehouse + Broker's commission + Title insurance + Miscellaneous closing costs + Cost of demolishing the warehouse
Answer:
The cost of the land for Fresh Veggies, Incorporated is $678,700.
To calculate the cost of the land, we add up all the expenditures related to the acquisition of the land and warehouse. This includes the purchase price of $590,000, broker's commission of $39,000, title insurance of $2,900, miscellaneous closing costs of $7,800, and the cost of demolishing the warehouse at $39,000.
By using the formula provided, we get:
- Cost of the land = $590,000 + $39,000 + $2,900 + $7,800 + $39,000
- Cost of the land = $678,700
Therefore, Fresh Veggies, Incorporated should record the cost of the land as $678,700 for accounting purposes.