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17 July, 09:09

Determine the acquisition cost of land and building [LO1 Italian Bread Company purchased land as a factory site for $61,200. An old building on the property was demolished, and construction began on a new building. Costs incurred during the first year are listed below Demolition of old building Sale of salvaged materials Architect fees (for new building) Legal fees (for title investigation of land) Property taxes on the land (for the first year) Building construction costs Interest costs related to the construction $ 8,600 (2,400) 15,300 2,140 3,110 509,000 18,900

Required:

Determine the amounts that the company should record in the Land and the Building accounts.

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  1. 17 July, 09:17
    0
    Land account = $69,540

    Building account = $543,200

    Explanation:

    land

    Cost of land $61,200

    Demolition of old building $8,600

    Sale of salvaged materials ($2,400)

    Legal fees (for title investigation of land) $2,140

    total $69,540

    building

    Architect fees (for new building) $15,300

    Building construction costs $509,000

    Interest costs related to the construction $18,900

    total $543,200

    Property taxes on the land (for the first year) $3,110 are not capitalized. Land costs cannot be depreciated, while building costs are.
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