Question

On March 1, 2018, Beldon Corporation purchased land as a factory site for $71,000. An old building on the property was demolished, and construction began on a new building that was completed on December 15, 2018. Costs incurred during this period are listed below:

Demolition of old building	$	9,500
Architect’s fees (for new building)		10,000
Legal fees for title investigation of land		7,500
Property taxes on land (for period beginning March 1, 2018)		4,100
Construction costs		610,000
Interest on construction loan		10,500

Salvaged materials resulting from the demolition of the old building were sold for $3,100.

Required:
Determine the amounts that Beldon should capitalize as the cost of the land and the new building.

Answer 1

	Land:
					$	$
	Purchase price					71000
	Demolition of old building				9500
	Less: Salvage value				3100	6400
	Legal fees for title investigation of land					7500
	Total					84900
	Building:
						$
	Architect’s fees (for new building)					10000
	Construction costs					610000
	Interest on construction loan					10500
	Total					630500
	Note: Property taxes on land are operating expenses and it should not be capitalized