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.
| 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 | |||||||||
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