Question

Online Assignment #1: Determine the acquisition cost of land and building P7-1A The Italian Bread Company purchased land as a factory site for $70,000. An old building on the . property was demolished, and construction began on a new building. Costs incurred during the first year are listed as follows: 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 Required: $ 9,000 (1,100) 20,000 3,000 4,000 600,000 23,000 Determine the amounts that the company should record in the Land and the Building accounts

Answer 1

Answers

• The amount to be recorded in Land account:

Purchase cost of land	$                70,000
Demolition cost of old building	$                   9,000
Sale of salvaged materials	$                (1,100)
Legal Fees (for Land)	$                   3,000
Property Taxes on Land	[not recorded as a capitalized cost, it’s an expense]
Total cost recorded in Land account	$                80,900

• The amount to be recorded in Building account:

Architect fees (for new building)	$                20,000
Building construction costs	$              600,000
Interest costs related to the construction	$                23,000
Total cost of new building	$              643,000