Chapter 10 Exercise 10-1 On March 1, 2013, Beldon Corporation purchased land as
ID: 2359005 • Letter: C
Question
Chapter 10 Exercise 10-1 On March 1, 2013, Beldon Corporation purchased land as a factory site for 60,000. an old buildding on the property was demolished and construction began on a new building that was completed on December 15, 2013. Costs incurred during this period are listed below: Demolition of the old building 4,000 Architect's fees (for new building) 12,000 Legal fees for title investigation of land 2,000 Property taxes on land (for period beginning March 1, 2013) 3,000 Construction costs 500,000 Interest on construction loan 5,000 Salvaged materials resulting from the demolition of the old buidling were sold for 2,000. Question: Determine the amounts that Beldon should capitalize as the cost of the land and the new building. Would appreciate help. Thank you.Explanation / Answer
Solution: Computation of the Capitalize cost of the land and New Building
Cost of land:
Particulars
Amount
Land
$ 60,000.00
demolition
$ 4,000.00
legal fees
$ 2,000.00
salvage materials
$ (2,000.00)
Cost of Land
$ 64,000.00
Cost of building:
Particulars
Amount
construction costs
$ 500,000.00
interest on construction loan
$ 5,000.00
architect
$ 12,000.00
Cost of Building
$ 517,000.00
Hence the cost of building and cost of land is
$ 517,000.00
$ 64,000.00
Property taxes are operating costs
Solution: Computation of the Capitalize cost of the land and New Building
Cost of land:
Particulars
Amount
Land
$ 60,000.00
demolition
$ 4,000.00
legal fees
$ 2,000.00
salvage materials
$ (2,000.00)
Cost of Land
$ 64,000.00
Cost of building:
Particulars
Amount
construction costs
$ 500,000.00
interest on construction loan
$ 5,000.00
architect
$ 12,000.00
Cost of Building
$ 517,000.00
Hence the cost of building and cost of land is
$ 517,000.00
$ 64,000.00
Property taxes are operating costs
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