Question

Crane Landscaping began construction of a new plant on December 1, 2017. On this date, the company purchased a parcel of land for $140,400 in cash. In addition, it paid $2,640 in surveying costs and $3,840 for a title insurance policy. An old dwelling on the premises was demolished at a cost of $3,120, with $1,200 being received from the sale of materials. Architectural plans were also formalized on December 1, 2017, when the architect was paid $34,800. The necessary building permits costing $3,120 were obtained from the city and paid for on December 1 as well. The excavation work began during the first week in December with payments made to the contractor in 2018 as follows. Date of Payment Amount of Payment March 1 $252,000 May 1 332,400 July 1 64,800 The building was completed on July 1, 2018. To finance construction of this plant, Crane borrowed $609,600 from the bank on December 1, 2017. Crane had no other borrowings. The $609,600 was a 10-year loan bearing interest at 9%. Compute the balance in each of the following accounts at December 31, 2017, and December 31, 2018. (Round answers to 0 decimal places, e.g. 5,275.) December 31, 2017 December 31, 2018 (a) Balance in Land Account (b) Balance in Building (c) Balance in Interest Expense

Answer 1

T-Accounts:
		DR	CR	BAL		calculation
LAND A/C
12/1/2017	PURCHASE	140400
	SURVEY	2640
	INSUR	3840
	MATERIAL		1200
12/31/2017	CLOSING BAL			145680
BUILDING A/C
12/1/2017	ARCHITECT	34800
	PERMIT	3120
12/31/2017	CLOSING BAL			37920
3/1/2018	CONTRACTOR	252000
5/1/2018	CONTRACTOR	332400
7/1/2018	CONTRACTOR	64800
12/31/2018	CLOSING BAL			687120
INTEREST A/C
12/31/2017	FINANCE CO.	1377		1377		(145680+34800+3120)*9%*1/12
12/31/2018	FINANCE CO.	45864		47241		(183600*9%)+(252000*9%*10/12)+(174000*9%*8/12)