$ 600,000 $ 48,000 $ 6,000 $ 18,000 During January, Alliah Company incurred transactions and provided the information that follows: Purchase of a tract of land (site number 101) with a building on January 1, 2020 Payment of real estate broker's commission Legal fees Title guarantee insurance Instructions: Prepare a schedule that discloses the individual costs making up the balance in the land account for land site number 101 as of September 30, 2020. ALLIAH COMPANY Cost of Land (Site #101) As of September 30, 2021 Land value indicated on the closing statement Building value indicated on the closing statement Cost to raze the building shortly after acquisition $ 600,000 Land Value $ 600,000 $ 100,000 $ 56,000 Real estate broker's commission Legal fees $ 48,000 S 6,000 Title insurance $ 18,000 Entered into a fixed-price contract with Slatkin Builders, Inc. on March 1, 2020, for the construction of an office building on land site number 101. The building was completed and occupied on Additional construction costs were incurred as follows: $ 4,000,000 Removal of old building $ 56,000 Cost of land $ 728,000 Plans, specifications, and blueprints Architects' fees for design and supervision $ 24,000 $ 80,000 Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2021. Show supporting computations in good form. Calculation of capitalized interest: Estimated useful life of the building from date of completion 40 years Depreciation method used for building (declining balance) Interest to be capitalized: Borrowing to finance construction costs on March 1, 2020 Payment terms on loan: $ 4,000,000 Number of installment payments 10 Amount of each annual installment, plus interest, starting $ March 1, 2021 400,000 Actual interest: Interest rate 10% Weighted-average amounts of accumulated building construction expenditures: For the period March 1 to December 31, 2020 $ For the period January 1 to September 30, 2021 $ 1,800,000 2,400,000 Fixed construction contract price Plans specifications and blueprints Architects' fees Interest capitalized during 2020 Interest capitalized during 2021 Cost of building Weighted Average Accumulated Expenditure 2020 $ 2021 $ 1,800,000 2,400,000 X Interest Rate Interest to be Capitalized (Avoidable Interest) 10% 10% = $ = $ 180,000 240,000 Loan Balance Interest Rate Fraction Interest Paid 2020 $ 4,000,000 X 10% X 0.833333333 = 2021 X X Total interest for 2020 and 2021 ALLIAH COMPANY Cost of Building As of September 30, 2021 $ 4,000,000 $ 24,000 $ 80,000 $ 180,000 $ 240,000 $ 4,524,000 10% X 10% X
$ 600,000 $ 48,000 $ 6,000 $ 18,000 During January, Alliah Company incurred transactions and provided the information that follows: Purchase of a tract of land (site number 101) with a building on January 1, 2020 Payment of real estate broker's commission Legal fees Title guarantee insurance Instructions: Prepare a schedule that discloses the individual costs making up the balance in the land account for land site number 101 as of September 30, 2020. ALLIAH COMPANY Cost of Land (Site #101) As of September 30, 2021 Land value indicated on the closing statement Building value indicated on the closing statement Cost to raze the building shortly after acquisition $ 600,000 Land Value $ 600,000 $ 100,000 $ 56,000 Real estate broker's commission Legal fees $ 48,000 S 6,000 Title insurance $ 18,000 Entered into a fixed-price contract with Slatkin Builders, Inc. on March 1, 2020, for the construction of an office building on land site number 101. The building was completed and occupied on Additional construction costs were incurred as follows: $ 4,000,000 Removal of old building $ 56,000 Cost of land $ 728,000 Plans, specifications, and blueprints Architects' fees for design and supervision $ 24,000 $ 80,000 Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2021. Show supporting computations in good form. Calculation of capitalized interest: Estimated useful life of the building from date of completion 40 years Depreciation method used for building (declining balance) Interest to be capitalized: Borrowing to finance construction costs on March 1, 2020 Payment terms on loan: $ 4,000,000 Number of installment payments 10 Amount of each annual installment, plus interest, starting $ March 1, 2021 400,000 Actual interest: Interest rate 10% Weighted-average amounts of accumulated building construction expenditures: For the period March 1 to December 31, 2020 $ For the period January 1 to September 30, 2021 $ 1,800,000 2,400,000 Fixed construction contract price Plans specifications and blueprints Architects' fees Interest capitalized during 2020 Interest capitalized during 2021 Cost of building Weighted Average Accumulated Expenditure 2020 $ 2021 $ 1,800,000 2,400,000 X Interest Rate Interest to be Capitalized (Avoidable Interest) 10% 10% = $ = $ 180,000 240,000 Loan Balance Interest Rate Fraction Interest Paid 2020 $ 4,000,000 X 10% X 0.833333333 = 2021 X X Total interest for 2020 and 2021 ALLIAH COMPANY Cost of Building As of September 30, 2021 $ 4,000,000 $ 24,000 $ 80,000 $ 180,000 $ 240,000 $ 4,524,000 10% X 10% X
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter7: Operating Assets
Section: Chapter Questions
Problem 37BE
Related questions
Question
What do i enter for the actual interest part
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:
9781337679503
Author:
Gilbertson
Publisher:
Cengage
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:
9781337679503
Author:
Gilbertson
Publisher:
Cengage
Financial & Managerial Accounting
Accounting
ISBN:
9781285866307
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Financial Reporting, Financial Statement Analysis…
Finance
ISBN:
9781285190907
Author:
James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:
Cengage Learning