On march 1, 2022, ivanhoe company acquired real estate, on which it planned to construct a small office building, by paying $76,500 in cash. an old warehouse on the property was demolished at a cost of $7,500; the salvaged materials were sold for $1,560. additional expenditures before construction began included $1,060 attorney’s fee for work concerning the land purchase, $4,150 real estate broker’s fee, $8,560 architect’s fee, and $13,300 to put in driveways and a parking lot. (a) determine the amount to be reported as the cost of the land.

$109,510

Explanation:

All the cost incurred will be added together and we minus $1560 realized from salvaged materials on warehouse to get $109,510.

The cost of property plant and equipment consist of the price , other tax payment e.g vat etc.

It further includes cost incurred to bring the asset to required state of use, which necessitate adding the cost of raising warehouse and deducting income realized from

thereon and the cost of parking lots and drive way.

The cost further includes payments of professional fees which includes Architecture, Attorney, Brokers etc.

one of the appeals of a sole proprietorship is that business expenses are kept separate from your personal income tax return