n 2014, Kilroy Company purchased land for a new office building at a purchase pr
ID: 2589042 • Letter: N
Question
n 2014, Kilroy Company purchased land for a new office building at a purchase price of $325,000. There was an existing building on the site that was demolished at a cost of $12,000. Scrap from the demolition was sold for $3,500. The building was completed during 2014. In addition, the following costs were incurred: Professional Fees: Attorneys for the purchase contract $ 7,500 Engineers to determine the required grading $ 18,000 Architects to design new building $ 40,000 Building permits $ 8,000 Construction of new building $ 1,275,000 In Kilroy’s December 31, 2014, financial statements, how will the above costs be reported? Land Building Expense a. $ 341,000 $ 1,323,000 $ 0 b. $ 351,500 $ 1,315,000 $ 15,500 c. $ 359,000 $ 1,323,000 $ 0 d. $ 333,500 $ 1,275,000 $ 73,500
Explanation / Answer
Solution:-
Cost of Land:-
Purchase Cost = $325000
Demolition Cost = $12000
Cost of Attorneys for the Purchase Contract = $7500
Grading Cost= $18000
Less:- Scrape Sold = $3500
Total Cost of Land:- $359000
Cost of Building:-
Cost of Architech Design= $40000
Cost of Building Permits= $8000
Cost of Construction of Building= $1275000
Total Cost of Building= 1323000
There is no Cost that will be reported as expenses as all the cost need to be capitalised.
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