Question

A company purchased land for $89600 cash. Real estate brokers' commission was $4700 and $7600 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle, the cost of land would be recorded at

Answer 1

$101,900

Step-by-step explanation:

The computation of the cost of land would be recorded by using the historical cost principle is shown below:

As we know that

According to the historical cost principle the assets should be recorded at the purchase price or historical cost by considering the commission and demolishing value

Here, the cost of land is

= Purchase value of land + real estate broker commission + demolishing value

= $89,600 + $4,700 + $7,600

= $101,900