Determining the Cost of Land for FVI
The expenditures related to the acquisition of land and a warehouse by Fresh Veggies, Incorporated (FVI) are as follows:
- 1. Purchase price of land and warehouse: $490,000
- 2. Broker's commission: $29,000
- 3. Title insurance: $1,900
- 4. Miscellaneous closing costs: $6,000
- 5. Demolition cost of warehouse: $29,000
Determining the Cost of Land for FVI
Fresh Veggies, Incorporated (FVI) purchased land and a warehouse for $490,000. In addition to the purchase price, FVI incurred several expenditures related to the acquisition:
Broker's Commission: $29,000
Title Insurance: $1,900
Miscellaneous Closing Costs: $6,000
The warehouse was immediately demolished at a cost of $29,000. The total additional expenditures amount to $66,900. To determine the cost of the land, we need to add the purchase price and the additional expenditures:
Purchase Price: $490,000
Additional Expenditures: $66,900
Therefore, the cost of the land for FVI is $556,900. This amount should be recorded in the journal entry by debiting the Land account and crediting the Cash account, assuming cash was paid for all expenditures.