Question: McCoy s Fish House purchases a tract of land and an

McCoy’s Fish House purchases a tract of land and an existing building for $400,000. The company plans to remove the old building and construct a new restaurant on the site. In addition to the purchase price, McCoy pays closing costs, including title insurance of $3,000. The company also pays $6,000 in property taxes, which includes $4,000 of back taxes (unpaid taxes from previous years) paid by McCoy on behalf of the seller and $2,000 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor $25,000 to tear down the old building and remove it from the site. McCoy is able to sell salvaged materials from the old building for $2,000 and pays an additional $6,000 to level the land.

Determine the amount McCoy’s Fish House should record as the cost of the land.

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  • CreatedJuly 15, 2014
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