On January 1, 2016, the Blackstone Corporation purchased a tract of land (site n

Question

On January 1, 2016, the Blackstone Corporation purchased a tract of land (site number 11) with a building for $780,000. Additionally, Blackstone paid a real estate broker's commission of $54,000, legal fees of $5,000, and title insurance of $27,000. The closing statement indicated that the land value was $590,000 and the building value was $190,000. Shortly after acquisition, the building was razed at a cost of $93,000.

     Blackstone entered into a $4,800,000 fixed-price contract with Barnett Builders, Inc., on March 1, 2016, for the construction of an office building on land site 11. The building was completed and occupied on September 30, 2017. Additional construction costs were incurred as follows:

     To finance the construction cost, Blackstone borrowed $4,800,000 on March 1, 2016. The loan is payable in 10 annual installments of $480,000 plus interest at the rate of 14%. Blackstone's average amounts of accumulated building construction expenditures were as follows:

  For the period January 1 to September 30, 2017 (including capitalized interest for 2016)

Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site 11 as of September 30, 2017.

Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2017.

References

eBook & Resources

WorksheetLearning Objective: 10-01 Identify the various costs included in the initial cost of property, plant, and equipment, natural resources, and intangible assets.Learning Objective: 10-07 Identify the items included in the cost of a self-constructed asset and determine the amount of capitalized interest.

Difficulty: 3 HardLearning Objective: 10-02 Determine the initial cost of individual property, plant, and equipment and intangible assets acquired as a group for a lump-sum purchase price.

Check my work

©2015 McGraw-Hill Education. All rights reserved.

On January 1, 2016, the Blackstone Corporation purchased a tract of land (site number 11) with a building for $780,000. Additionally, Blackstone paid a real estate broker's commission of $54,000, legal fees of $5,000, and title insurance of $27,000. The closing statement indicated that the land value was $590,000 and the building value was $190,000. Shortly after acquisition, the building was razed at a cost of $93,000.

     Blackstone entered into a $4,800,000 fixed-price contract with Barnett Builders, Inc., on March 1, 2016, for the construction of an office building on land site 11. The building was completed and occupied on September 30, 2017. Additional construction costs were incurred as follows:

Explanation / Answer

Land Building Total Purchase Price $      590,000.00 $      190,000.00 $      780,000.00 Brokers Commission $        40,846.15 $        13,153.85 $        54,000.00 Legal fees $          3,782.05 $          1,217.95 $          5,000.00 Title insurance $        20,423.08 $          6,576.92 $        27,000.00 Razing cost $        93,000.00 $        93,000.00 Cost of New Building $ 4,800,000.00 $ 4,800,000.00 Plans, Specifications and blue prints $        30,000.00 $        30,000.00 Architects fees $      102,000.00 $      102,000.00 Interest on loan for 17 month $      952,000.00 $      952,000.00 Total Cost capitalized $      655,051.28 $ 6,187,948.72 $ 6,843,000.00 Note : Initial cost for acquisition are apportioned on the nration of purchase. for example: Brokers commission for Land= 54,000/780,000 x 590,000=40846.15 Brokers commission for Building = 54,000/780,000 x 190,000 =13,153.85 Question 1. Answer $      655,051.28 Question 2. Answer $ 6,187,948.72

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.