Your client, Salvador Plastics Co., found three suitable sites, each having certain unique advantages, for a new plant facility. In order to thoroughly investigate the advantages and disadvantages of each site, 1-year options were purchased for an amount equal to 6% of the contract price of each site. The costs of the options cannot be applied against the contracts. Before the options expired, one of the sites was purchased at the contract price of $400,000. The option on this site had cost $24,000. The two options not exercised had cost $16,000 each.

Instructions

Present arguments in support of recording the cost of the land at each of the following amounts.

(a) $400,000.

(b) $424,000.

(c) $456,000.