Construction of Building: A building was constructed on land purchased last year

Question

Construction of Building:

A building was constructed on land purchased last year at a cost of $210,000. Construction began on February 1 and was completed on November 1.

The payments to the contractor were as follows.

Date Payment 2/1 $168,000

6/1 504,000

9/1 672,000

11/1 140,000

To finance construction of the building, a $840,000, 12% construction loan was taken out on February 1. The loan was repaid on November 1. The firm had $280,000 of other outstanding debt during the year at a borrowing rate of 8%. Record the acquisition of each of these assets.

My answer is:

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Explanation / Answer

210,000

Calculation Of Interest :

= 840,000 * 12% * 9/12

= $75,600

Particulars Debit Credit Land

210,000

Building 1,559,600 To Cash 1,694,000 To Interest Expense 75,600

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