EX 10-3 Determine cost of land

Discount Delivery Company acquired an adjacent lot to construct a new warehouse, paying $25,000 and giving a short-term note for $300,000. Legal fees paid were $2,100, delinquent taxes assumed were $14,000, and fees paid to remove an old building from the land were $9,000. Materials salvaged from the demolition of the building were sold for $3,500. A contractor was paid $800,000 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet.

Answer:
Initial cost of land ($25,000 + $300,000) ........................................  $325,000
Plus: Legal fees....................................................$ 2,100  
      Delinquent taxes.............................................. 14,000  
      Demolition of building........................................ 9,000            25,100  
   $350,100
Less salvage of materials...........................................................   3,500
Cost of land ...................................................................... $346,600

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