Amelia Corporation purchased a tract of land for the construction of a new office building. The entity decided to demolish the existing old building and constructed a new one. Purchase piece of land and an old apartment building 2,500,000 Fair value of land 2,000,000 Legal fees, including fee for title search 20,000 Payment of land mortgage and related due at the time of sale 50,000 Payment of delinquent property taxes assumed 20,000 Cost of razing the apartment building 30,000 Grading and drainage on land site 15,000 Architect fee on new building 200,000 Payment to building contractor 9,000,000 Interest cost on specific borrowing during construction 200,000 Payment of medical bills of employees accidentally injured while inspecting building construction 10,000 Cost of paving driveway and parking lot 50,000 Cost of trees, shrubs and other landscaping 60,000 Cost of installing lights in parking lot 15,000 Premium for insurance on building during construction 30,000 Cost of open house party to celebrate opening of building 80,000 What is the cost of new building? Group of answer choices 9,460,000 9,575,000 9,550,000 9,540,000
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Amelia Corporation purchased a tract of land for the construction of a new office building.
The entity decided to demolish the existing old building and constructed a new one.
Purchase piece of land and an old apartment building 2,500,000
Fair value of land 2,000,000
Legal fees, including fee for title search 20,000
Payment of land mortgage and related
due at the time of sale 50,000
Payment of delinquent property taxes assumed 20,000
Cost of razing the apartment building 30,000
Grading and drainage on land site 15,000
Architect fee on new building 200,000
Payment to building contractor 9,000,000
Interest cost on specific borrowing during construction 200,000
Payment of medical bills of employees accidentally injured
while inspecting building construction 10,000
Cost of paving driveway and parking lot 50,000
Cost of trees, shrubs and other landscaping 60,000
Cost of installing lights in parking lot 15,000
Premium for insurance on building during construction 30,000
Cost of open house party to celebrate opening of building 80,000
What is the cost of new building?
Group of answer choices
9,460,000
9,575,000
9,550,000
9,540,000
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