A company purchased property for a building site. The costs associated with the property were: What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

The question is incomplete, below is a possible match of the complete question:

a company purchased property for a building site. the costs associated with the property were:

purchase price $175,00

real estate commisions $15,000

legal fees 800

expenses of clearing the land 2,000

expenses to remove old building 1,000

what portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

cost allocated to land = $193,800

cost allocated to new building = $0

Explanation:

The expenses associated with the ost of land purchase are all the necessary expenses made in the purchase of the land and in getting the land ready for use. These include legal fees, cost of clearing the land, cost of removing old structures etc. Therefore cost allocated to land is calculated as follows:

cost of land = purchase price + real estate commissions + legal fees + expenses of clearing the land + expenses to remove old building.

cost of land = 175,000 + 15,000 + 800 + 2,000 + 1,000 = $193,800

∴ cost of land = $193,800

cost of new building = $0

There is no transaction associated directly with setting up the new building, all the costs were associated with the acquisition of the land, hence the cost os the new building is $0

Atlantic Co. Journal entries

a.

March 1

Dr Cash$300,500

Cr Common Stock $174,000

(43,500×4)

Cr Paid-in Capital$126,500

($300,000-$174,000)

(Record of common stock for cash)

b.

April 1

Dr Cash$72,000

Cr Common Stock$72,000

(Record of common stock for cash)

c.

April 6

Dr Inventory $41,000

Dr Machinery$145,000

Dr Note Receivable$91,000

Cr Common Stock$55,000

(2,200 shares *$25 per share)

Cr Paid-in Capital $222,000

($145,000+$91,000+$41,000=$277,000-$55,000= $222,000)

(To record Insurance for Inventory, machinery,and notes receivable)

Explanation:

Since On March 1 Atlantic Co. was said to issues 43,500 shares of $4 par value common stock for $300,500 this means that we have to

Debit Cash with $300,500 and Credit Common Stock with $174,000(43,500×4) as well as Credit Paid-in Capital with $126,500 ($300,000-$174,000)

On April 1, OP Co as well issues no-par value common stock for $72,000 cash this means we have to Debit Cash with $72,000 and Credit Common Stock with the same amount .

While On April 6, based on information given to us about MPG transaction, we have to record Insurance for Inventory, machinery,and notes receivable by Debiting each and Crediting common stock and paid in capital .