[NinaSun]

Oak Co., a newly formed corporation, incurred the following expenditures related to land and building:

County assessment for sewer lines $2,500

Title search fees 625

Cash paid for land with a building to be demolished 135,000

Excavation for construction of basement 21,000

Removal of old building $21,000 less salvage value

of $5000 16,000

At what amount should Oak record the land?

a. $138,125

b. $154,125

c. $175,625

d, $153,500

The answer is “b”, which includes cash paid, title search fee, county assessment and removal of building. I dont thing the $16,000 is cost of removal. Instead, I think it just the carry value of the old building, which should not be included in the cost of the land. Compared with the question below, I feel confuse about the fee for “county assessment for sewer lines”

Federal Manufactures, Inc. purchased land with the intention of building its new administrative headquarters on the site. Which of the following costs should be charged to “Land”?

I. Title and recording fees

II. Clearing of trees and grading.

III. Interest on loan to purchase land.

IV. Architect’s fees

V. Installation of sewage system.

a. I, II, III, and IV only

b. I only

c. I and II only

d. I, II, III, IV, and V.

The answer is “c”, which not include installation of sewage system. The installation of sewage system in the land improvement not land. I think so does the “county assessment of sewer lines”. Arent they the same thing? Thanks

AUD-74,75 11/2014
REG-80 04/2015
FAR-74, 91 11/2015
BEC-79 08/2015