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Waterway Industries purchased land as a factory site for $1315000. Waterway paid $117000 to tear down...

Waterway Industries purchased land as a factory site for $1315000. Waterway paid $117000 to tear down two buildings on the land. Salvage was sold for $8400. Legal fees of $5480 were paid for title investigation and making the purchase. Architect's fees were $47000. Title insurance cost $3700, and liability insurance during construction cost $4000. Excavation cost $15800. The contractor was paid $4200000. An assessment made by the city for pavement was $9800. Interest costs during construction were $252000.

The cost of the building that should be recorded by Waterway Industries is

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The cost of the building to be recorded by Waterway industries is based on IAS 16.

IAS 16, ‘Property, plant and equipment’ includes guidance on how to account for property carried at cost. IAS 16 applies to property (that is, buildings) held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, if the property is expected to be used during more than one period.

As per IAS 16, the following costs should be included in the cost of Building

Particulars Amount
Architect's fees $47,000
Liability insurance during construction cost $4,000
Excavation cost $15,800
Cash Paid to Contractor $4,200,000
Interest costs during construction $252,000
Total $4,518,800

Therefore the total cost of the building that should be recorded by Waterway Industries is $4,518,800

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