A company purchased a 3-acre tract of land for a building site for $450,000. The company demolished the old building at a cost of $22,000, but was able to sell scrap from the building for $2,500. The cost of title transfer was $1,400 and attorney fees for reviewing the contract was $700. Property taxes paid were $8,000, of which $750 covered the period after the purchase date. The capitalized cost of the land is: Multiple Choice $345,350. $478,850. $480,350. $480,600.

$478,850

Explanation:

The computation of capitalized cost of the land is shown below:-

Capitalized cost of the land = Purchase cost + Demolition of old building + Cost of Title insurance + Attorney fees + Property taxes paid - Scrap value of the building

= $450,000 + $22,000 + $1,400 + $700 + ($8,000 - $750) - $2,500

= $450,000 + $22,000 + $1,400 + $700 + $7,250 - $2,500

= $481,350 - $2,500

= $478,850

So, for computing the capitalized cost of the land we simply applied the above formula.

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a.