Question

Culver Co. purchased land as a factory site for $600,000. The process of tearing down two old buildings on the site and constructing the factory required 6 months. The company paid $63,000 to raze the old buildings and sold salvaged lumber and brick for $9,450. Legal fees of $2,775 were paid for title investigation and drawing the purchase contract. Culver paid $3,300 to an engineering firm for a land survey, and $102,000 for drawing the factory plans. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $2,250, and a liability insurance premium paid during construction was $1,350. The contractor’s charge for construction was $4,110,000. The company paid the contractor in two installments: $1,800,000 at the end of 3 months and $2,310,000 upon completion. Interest costs of $255,000 were incurred to finance the construction. Determine the cost of the land and the cost of the building as they should be recorded on the books of Culver Co. Assume that the land survey was for the building.

Cost of the Land

Cost of the Building $

Answer 1

	Land	Building
Land cost	600000
Razing Costs	63000
Salvage value	-9450
Legal Fees	2775
Land survey		3300
Factory plans		102000
Title Insurance	2250
Liability Insurance		1350
Construction cost		4110000
Interest cost		255000
Total	658575	4471650
Cost of the Land	658575
Cost of the Building	4471650