Please help by explaining how to get each number. Will rate. P10-5 (01,3) EXCEL
ID: 2561956 • Letter: P
Question
Please help by explaining how to get each number. Will rate.
P10-5 (01,3) EXCEL (Classification of Costs and Interest Capitalization) On January 1, 2017, 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.Explanation / Answer
Answer:
(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, 2018
BLAIR CORPORATION
Cost of Land (Site #101)
As of September 30, 2018
Cost of land and old building
$500,000
Real estate broker’s commission
36,000
Legal fees
6,000
Title insurance
18,000
Removal of old building
54,000
Cost of land
$614,000
________________________________________________________
(b)
Prepare a schedule that discloses the individual costs that should be capitalized in the office
building account as of September 30, 2018
BLAIR CORPORATION
Cost of Building
As of September 30, 2018
Fixed construction contract price
$3,000,000
Plans, specifications, and blueprints
21,000
Architects’ fees
82,000
Interest capitalized during 2017 (calculated as under)
130,000
Interest capitalized during 2018 (calculated as under)
190,000
Cost of building
$3,423,000
Interest to be capitalized:
2017
$1,300,000
×
10%
=
$130,000
2018
$1,900,000
×
10%
=
$190,000
BLAIR CORPORATION
Cost of Land (Site #101)
As of September 30, 2018
Cost of land and old building
$500,000
Real estate broker’s commission
36,000
Legal fees
6,000
Title insurance
18,000
Removal of old building
54,000
Cost of land
$614,000
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