Reference no: EM133060759

Question - Acquisition of Land and Building - On February 1, 2019, Edwards Corporation purchased a parcel of land as a factory site for $120,000. It demolished an old building on the property and began construction on a new building that was completed on October 2, 2019. Costs incurred during this period are:

Demolition of old building $8,000

Architect's fees 30,000

Legal fees for title investigation and purchase contract 5,000

Construction costs 625,000

Edwards sold salvaged materials resulting from the demolition for $2,000.

Required -

1. At what amount should Edwards record the cost of the land and the new building, respectively?

2. Next Level If management misclassified a portion of the building's cost as part of the cost of the land, what would be the effect on the financial statements?