Calculating the Cost of Land for Fresh Veggies, Inc.

How much should Fresh Veggies, Inc. record as the cost of the land?

The amount that Fresh Veggies, Inc. (FVI) should record as the cost of the land is $457,300.

Explanation

Fresh Veggies, Inc. (FVI) purchased land and a warehouse for $410,000. In addition to the purchase price, FVI incurred the following expenditures related to the acquisition: broker's commission of $21,000, title insurance of $1,100, and miscellaneous closing costs of $4,200. The warehouse was immediately demolished at a cost of $21,000 in anticipation of building a new warehouse. To determine the cost of the land, we need to add up the purchase price and all related expenditures.

Calculation:

  • Land and warehouse purchase price: $410,000
  • Broker's commission: $21,000
  • Title insurance: $1,100
  • Miscellaneous closing costs: $4,200
  • Cost of demolishing the warehouse: $21,000

By adding up all these costs, we get $457,300 as the total cost of the land for FVI. Therefore, the company should record $457,300 as the cost of the land in their financial records.

← Enhancing workgroup relationships with lmx scales Allocating purchase price for land building and land improvements →

More Posts: