A company that builds shopping malls buys an abandoned apartment complex for $5.5 million. It pays a demolition company $500,000 to demolish the entire building. Which of the following is true? The company would record $6 million as the cost of the land. The company would record $5 million as the cost of the land. The company would record $500,000 as demolition expense. The company would record $5.5 million as the cost of the land.
Answer : The company would record $6 million as the cost of the land
Explanation to the above answer
Cost of Land. : Land purchases often involve real estate commissions, legal fees, bank fees, title search fees, and similar expenses.. In addition, old buildings may need to be demolished before the company can use the land. Such demolition expenses are considered part of the land’s cost.
