Question

E10.2 (LO 1) Excel (Acquisition Costs of Realty) Martin Buber Co. purchased land as a fac. tory site for $400,000. The process of tearing down two old buildings on the site and constructing the factory required 6 months. The company paid $42,000 to raze the old buildings and sold salvaged lumber and brick for $6,300. Legal fees of $1,850 were paid for title investigation and drawing the purchase contract. Martin Buber paid $2,200 to an engineering firm for a land survey, and $68,000 for drawing the factory plans. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $1,500, and a liability insurance premium paid during construction was $900. The contractor's charge for construction was $2,740,000. The company paid the contractor in two installments: $1,200,000 at the end of 3 months and $1,540,000 upon completion. Interest costs of $170,000 were incurred to finance the construction Instructions Determine the cost of the land and the cost of the building as they should be recorded on the books of Martin Buber Co. Assume that the land survey was for the building.

Answer 1

A В 1 Cost of Land: 2 Purchase price of land 3 Cost to raze the old building 4 Cost of title insurance 5 Legal fee 6 Cost of land $400,000 S35,700 S1,500 $1,850 S439,050 7 8 Cost of Building: 9 Cost of drawing the factory plans 10 Surveying cost 11 Liability insurance premium S68,000 $2,200 $900 12 Cost of construction $2,740,000 s170,000 S2,981,100 13 Interest cost 14 Cost of building Calculations are shown below В 1 Cost of Land: 400000 42000-6300 1500 1850 =SUM(B2:B5 2 Purchase price of land 3 Cost to raze the old building 4 Cost of title insurance 5 Legal fee 6 Cost of land 7 8 Cost of Building: 9 Cost of drawing the factory plans 10 Surveying cost 11 Liability insurance premium 68000 2200 900 2740000 170000 12 Cost of construction 13 Interest cost 14 Cost of building |-SUM (B9 :B13)