0.6 (LO 2) (Borrowing Costs) Cho Landscaping began construction of a new plant on December 1, 2022 (all amounts in thousands). On this date, the company purchased a parcel of land for ¥139,000 in cash. In addition, it paid ¥2,000 in surveying costs and ¥4,000 for a title insurance policy. An old dwelling on the premises was demolished at a cost of ¥3,000, with ¥1,000 being received from the sale of materials. Architectural plans were also formalized on December 1, 2022, when the architect was paid ¥30,000. The necessary building permits costing ¥3,000 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 2023 as follows. Date of Payment Amount of Payment March 1 ¥240,000 Мay 1 330,000 July 1 60,000 The building was completed on July 1, 2023. To finance construction of this plant, Cho borrowed ¥600,000 from the bank on December 1, 2022. Cho had no other borrowings. The ¥600,000 was a 10-year loan bearing interest at 8%. Excess funds from the loan were invested during 2022 and earned ¥2,000. During 2023, the excess funds from the loan earned ¥1,000. Instructions

0.6 (LO 2) (Borrowing Costs) Cho Landscaping began construction of a new plant on December 1, 2022 (all amounts in thousands). On this date, the company purchased a parcel of land for ¥139,000 in cash. In addition, it paid ¥2,000 in surveying costs and ¥4,000 for a title insurance policy. An old dwelling on the premises was demolished at a cost of ¥3,000, with ¥1,000 being received from the sale of materials. Architectural plans were also formalized on December 1, 2022, when the architect was paid ¥30,000. The necessary building permits costing ¥3,000 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 2023 as follows. Date of Payment Amount of Payment March 1 ¥240,000 Мay 1 330,000 July 1 60,000 The building was completed on July 1, 2023. To finance construction of this plant, Cho borrowed ¥600,000 from the bank on December 1, 2022. Cho had no other borrowings. The ¥600,000 was a 10-year loan bearing interest at 8%. Excess funds from the loan were invested during 2022 and earned ¥2,000. During 2023, the excess funds from the loan earned ¥1,000. Instructions

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

P10.6 (LO 2) (Borrowing Costs) Cho Landscaping began construction of a new
plant on December 1, 2022 (all amounts in thousands). On this date, the company
purchased a parcel of land for ¥139,000 in cash. In addition, it paid ¥2,000 in
surveying costs and ¥4,000 for a title insurance policy. An old dwelling on the
premises was demolished at a cost of ¥3,000, with ¥1,000 being received from the
sale of materials.
Architectural plans were also formalized on December 1, 2022, when the architect
was paid ¥30,000. The necessary building permits costing ¥3,000 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 2023
as follows.
Date of Payment Amount of Payment
March 1
¥240,000
Мay 1
330,000
July 1
б0,000
The building was completed on July 1, 2023.
To finance construction of this plant, Cho borrowed ¥600,000 from the bank on
December 1, 2022. Cho had no other borrowings. The ¥600,000 was a 10-year loan
bearing interest at 8%. Excess funds from the loan were invested during 2022 and
earned ¥2,00o. During 2023, the excess funds from the loan earned ¥ı1,000.
Instructions

Compute the balance in each of the following accounts at December 31, 2022, and
December 31, 2023. (Round amounts to the nearest 1,000 yen.)
a. Land.
b. Buildings.
c. Interest Expense.

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Step 1 Computation of Balances as on December 31, 2022:

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Step 2 Computation of Balances as on December 31, 2023:

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