Understanding Capitalization of Land and Building Costs
Fullerton Waste Management Land and Warehouse Acquisition
Fullerton Waste Management purchased land and a warehouse for $790,000. In addition to the purchase price, Fullerton made the following expenditures related to the acquisition:
- Broker’s commission: $49,000
- Title insurance: $12,500
- Miscellaneous closing costs: $15,500
The warehouse was immediately demolished at a cost of $37,000 in anticipation of the building of a new warehouse. Determine the amounts Fullerton should capitalize as the cost of the land and the building.
What is the total amount that Fullerton should capitalize as part of their land and building purchase? The total costs that Fullerton should capitalize as part of their land and building purchase amounts to $867,000. This includes the purchase price, broker's commission, title insurance, and miscellaneous closing costs. The cost of $37,000 for the demolition of the warehouse is a separate cost and is not included.