Pollachek Co. purchased land as a factory site for $450,000. The process of tearing down two old buildings on the site and constructing the factory required 6 months. The company paid $42,000 to raze the old buildings and sold salvaged lumber and brick for $6,300. Legal fees of $1,850 were paid for title investigation and drawing the purchase contract. Pollachek paid $2,200 to an engineering firm for a land survey, and $65,000 for drawing the factory plans. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $1,500, and a liability insurance premium paid during construction was $900. The contractor’s charge for construction was $2,740,000. The company paid the contractor in two installments: $1,200,000 at the end of 3 months and $1,540,000 upon completion. Interest costs of $170,000 were incurred to finance the construction.
Determine the cost of the land and the cost of the building as they should be recorded on the books of Pollachek Co. Assume that the land survey was for the building.
Click here for the solution: Pollachek Co. purchased land as a factory site for $450,000
Showing posts with label site. Show all posts
Showing posts with label site. Show all posts
Sunday, August 23, 2015
Thursday, July 30, 2015
On February 1, 2007, Reardon Corporation purchased a parcel of land as a factory site for $320,000
On February 1, 2007, Reardon Corporation purchased a parcel of land as a factory site for $320,000. An old building on the property was demolished and construction begun on a new warehouse that was completed April 15, 2008. Costs incurred on the construction project are listed below.
Demolition of old building $21,000
Architect's fees 31,700
Legal fees/title investigation 4,100
Construction costs 950,000
Imputed interest based on stock financing 14,000
Landfill for building site 19,300
Clearing of trees from the building site 9,600
Temporary buildings used for construction activities 29,000
Land survey 4,000
Excavation for basement 13,200
(Salvage materials from demolition sold for $1,800)
(Timber sold for $3,300)
Determine the cost of the land and new building.
Click here for the solution: On February 1, 2007, Reardon Corporation purchased a parcel of land as a factory site for $320,000
Demolition of old building $21,000
Architect's fees 31,700
Legal fees/title investigation 4,100
Construction costs 950,000
Imputed interest based on stock financing 14,000
Landfill for building site 19,300
Clearing of trees from the building site 9,600
Temporary buildings used for construction activities 29,000
Land survey 4,000
Excavation for basement 13,200
(Salvage materials from demolition sold for $1,800)
(Timber sold for $3,300)
Determine the cost of the land and new building.
Click here for the solution: On February 1, 2007, Reardon Corporation purchased a parcel of land as a factory site for $320,000
Saturday, July 25, 2015
On January 1, 2010, Blair Corporation purchased for $500,000 a tract of land (site number 101) with a building
P10-5 (Classification of Costs and Interest Capitalization) On January 1, 2010, Blair Corporation purchased for $500,000 a tract of land (site number 101) with a building. Blair paid a real estate broker's commission of $36,000, legal fees of $6,000, and title guarantee insurance of $18,000. The closing statement indicated that the land value was $500,000 and the building value was $100,000. Shortly after acquisition, the building was razed at a cost of $54,000. Blair entered into a $3,000,000 fixed-price contract with Slatkin Builders, Inc. on March 1, 2010, for the construction of an office building on land site number 101. The building was completed and occupied on September 30, 2011. Additional construction costs were incurred as follows.
Plans, specifications, and blueprints $21,000
Architects' fees for design and supervision 82,000
The building is estimated to have a 40-year life from date of completion and will be depreciated using the 150% declining balance method.
To finance construction costs, Blair borrowed $3,000,000 on March 1, 2010. The loan is payable in 10 annual installments of $300,000 plus interest at the rate of 10%. Blair's weighted-average amounts of accumulated building construction expenditures were as follows.
For the period March 1 to December 31, 2010 $1,300,000
For the period January 1 to September 30, 2011 1,700,000
Instructions
a) Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site number 101 as of September 30, 2011.
b) Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2011.
Click here for the solution: On January 1, 2010, Blair Corporation purchased for $500,000 a tract of land (site number 101) with a building
Plans, specifications, and blueprints $21,000
Architects' fees for design and supervision 82,000
The building is estimated to have a 40-year life from date of completion and will be depreciated using the 150% declining balance method.
To finance construction costs, Blair borrowed $3,000,000 on March 1, 2010. The loan is payable in 10 annual installments of $300,000 plus interest at the rate of 10%. Blair's weighted-average amounts of accumulated building construction expenditures were as follows.
For the period March 1 to December 31, 2010 $1,300,000
For the period January 1 to September 30, 2011 1,700,000
Instructions
a) Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site number 101 as of September 30, 2011.
b) Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2011.
Click here for the solution: On January 1, 2010, Blair Corporation purchased for $500,000 a tract of land (site number 101) with a building
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