A firm purchased land for $150,000. Broker commissions of $3,000 and other closing costs of $1,800 were paid in acquiring the land. An old building that was on the land was demolished. The demolition costs were $4,500, but some of the demolished building scrap parts were sold for $2,200. In addition, there were delinquent real estate taxes of $800 owing on the land, which the firm had to pay to acquire the land.

Required

a. Calculate the total cost of the land.

b. Provide several reasons for not recording the land purchase at its nominal price of $150,000.