On March 1, 2012, Enrique Company acquired real estate, on which it planned to construct a small office building, by paying $90,504 in cash. An old warehouse on the property was demolished at a cost of $7,646; the salvaged materials were sold for $1,633. Additional expenditures before construction began included $1,267 attorney's fee for work concerning the land purchase, $4,702 real estate broker's fee, $9,525 architect's fee, and $14,146 to put in driveways and a parking lot.
Determine the amount to be reported as the cost of the land.
To determine the amount to be reported as the cost of the land, we need to calculate the total amount spent on acquiring the land itself.
Let's break down the costs:
1. Cash paid for the acquisition of real estate: $90,504
2. Demolition cost of the old warehouse: $7,646
3. Sale of salvaged materials: $1,633
4. Attorney's fee for work concerning the land purchase: $1,267
5. Real estate broker's fee: $4,702
6. Architect's fee: $9,525
7. Cost to put in driveways and a parking lot: $14,146
To calculate the cost of the land, we need to subtract the costs that are not directly related to the land purchase. These costs include the demolition cost, the sale of salvaged materials, attorney's fee, real estate broker's fee, architect's fee, and the cost of driveways and a parking lot.
Therefore, the cost of the land is calculated as follows:
Cost of land = Cash paid for acquisition - Demolition cost - Sale of salvaged materials - Attorney's fee - Real estate broker's fee - Architect's fee - Cost of driveways and parking lot
Cost of land = $90,504 - $7,646 - $1,633 - $1,267 - $4,702 - $9,525 - $14,146
After performing the calculations, the amount to be reported as the cost of the land is $51,485.