McCoy’s Fish House purchases a tract of land and an existing
building for $1,000,000. The company plans to remove the old building and
construct a new restaurant on the site. In addition to the purchase price,
McCoy pays closing costs, including title insurance of $3,000. The company also
pays $14,000 in property taxes, which includes $9,000 of back taxes (unpaid
taxes from previous years) paid by McCoy on behalf of the seller and $5,000 due
for the current fiscal year after the purchase date. Shortly after closing, the
company pays a contractor $50,000 to tear down the old building and remove it
from the site. McCoy is able to sell salvaged materials from the old building
for $5,000 and pays an additional $11,000 to level the land.
Required:
Determine the amount McCoy’s Fish House should record as the
cost of the land.
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