McCoy's Fish House purchases a tract of land and an existing building for $920,000. The company plans to remove the old building and construct a new restaurant on the site. In addition to the purchase price, McCoy pays closing costs, including title insurance of $2,200. The company also pays $12,400 in property taxes, which includes $8,200 of back taxes (unpaid taxes from previous years) paid by McCoy on behalf of the seller and $4,200 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor $46,000 to tear down the old building and remove it from the site. McCoy is able to sell salvaged materials from the old building for $3,400 and pays an additional $10,200 to level the land.

Question

Gianni Lara

Business

22 February, 13:08

McCoy's Fish House purchases a tract of land and an existing building for $920,000. The company plans to remove the old building and construct a new restaurant on the site. In addition to the purchase price, McCoy pays closing costs, including title insurance of $2,200. The company also pays $12,400 in property taxes, which includes $8,200 of back taxes (unpaid taxes from previous years) paid by McCoy on behalf of the seller and $4,200 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor $46,000 to tear down the old building and remove it from the site. McCoy is able to sell salvaged materials from the old building for $3,400 and pays an additional $10,200 to level the land.

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Maximus Weber · Answer 1

Amount McCoy's Fish House should record as the cost of the land = Purchase price of land + Title insurance + Back taxes for property + Cost of removing the building + Cost of leveling the land - selling price pf salvaged materials

= $920,000 + $2,200 + $8,200 + $46,000 + $10,200 - $3,400

= $983,200

Property tax of $4,200 paid in the current year is included in the income statement as an expense and is not included in the cost of land.

Therefore, cost of land is $983,200