Jones corporation purchases a piece of land for $300,000. jones corp. paid $3,000 in brokerage commissions, $10,000 to clear and remove an unwanted building, $5,000 for building permits to construct a new building, $500,000 to construct a new building, and $5,000 in delinquent property taxes. what is the amount to be capitalized (debited) to the land account from this purchase?

$318,000

Explanation:

The Cost of Land Acquisition

Acquisiton cost represents all the costs incurred in purchasing the asset. These costs include shipping, taxes, commissions, cost of site preparation, asset testing and installation. For property including land and buildings, the cost of acquisition will include surveying, permits, closing fees, taxes and paying off liens among others.

For the Land Jones Corporation Purchsed the amount to be capitalized are the related to the immediate acquisiton of the land and not the subsequent use of the land. These include:

The cost of Constructing a new building and the charge for a building Permit relates to a subsequent use of the land. For instance, if the land is to be used for farming purposes, then the cost of constructing a new building and the permit to build will not be required.

The total amount to be debited therefore = 300,000+3,000+10,000+5000=$318,000