Belvidere Furniture purchased land paying $60,000 cash and signing a $260,000 note payable. In addition, Belvidere paid delinquent property tax of $30,000, title insurance costing $3,500, and $61,500 to level the land and clear it for use.

What is the cost of the land for accounting purposes and why?

Question 5 options:

$415,000 - The cash, the note, and all items listed were required to prepare the land for its intended business use.

$155,000 - The cash and other items were used to get the land for its intended use but the note should not be included in the cost

$320,000 - The cash and note were part of the initial payment, the remaining items should be expensed

$415,000 - Everything related to land purchases should always be capitalized