Early in its fiscal year ending December 31, 2021, San Antonio Outfitters finalized plans to expand operations. The first stage was completed on March 28 with the purchase of a tract of land on the outskirts of the city. The land and existing building were purchased by paying $270,000 immediately and signing a noninterest-bearing note requiring the company to pay $670,000 on March 28, 2023. An interest rate of 8% properly reflects the time value of money for this type of loan agreement. Title search, insurance, and other closing costs totaling $27,000 were paid at closing. At the end of April, the old building was demolished at a cost of $77,000, and an additional $57,000 was paid to clear and grade the land. Construction of a new building began on May 1 and was completed on October 29. Construction expenditures were as follows:          May 1 $ 2,250,000   July 30   1,850,000   September 1   1,320,000   October 1   2,220,000     San Antonio borrowed $4,100,000 at 8% on May 1 to help finance construction. This loan, plus interest, will be paid in 2022. The company also had a $5,950,000, 8% long-term note payable outstanding throughout 2021. In November, the company purchased 10 identical pieces of equipment and office furniture and fixtures for a lump-sum price of $670,000. The fair values of the equipment and the furniture and fixtures were $539,000 and $231,000, respectively. In December, San Antonio paid a contractor $320,000 for the construction of parking lots and for landscaping. INITIAL VALUATIONS   Land $1,005,417 Land improvements $320,000 Building $7,845,426 Equipment $469,000 Furniture & fixtures $201,000 Interest Expense $523, 706 What would be the journal entries for this problem?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Early in its fiscal year ending December 31, 2021, San Antonio Outfitters finalized plans to expand operations. The first stage was completed on March 28 with the purchase of a tract of land on the outskirts of the city. The land and existing building were purchased by paying $270,000 immediately and signing a noninterest-bearing note requiring the company to pay $670,000 on March 28, 2023. An interest rate of 8% properly reflects the time value of money for this type of loan agreement. Title search, insurance, and other closing costs totaling $27,000 were paid at closing.

At the end of April, the old building was demolished at a cost of $77,000, and an additional $57,000 was paid to clear and grade the land. Construction of a new building began on May 1 and was completed on October 29. Construction expenditures were as follows: 

       
May 1 $ 2,250,000  
July 30   1,850,000  
September 1   1,320,000  
October 1   2,220,000  
 


San Antonio borrowed $4,100,000 at 8% on May 1 to help finance construction. This loan, plus interest, will be paid in 2022. The company also had a $5,950,000, 8% long-term note payable outstanding throughout 2021.

In November, the company purchased 10 identical pieces of equipment and office furniture and fixtures for a lump-sum price of $670,000. The fair values of the equipment and the furniture and fixtures were $539,000 and $231,000, respectively. In December, San Antonio paid a contractor $320,000 for the construction of parking lots and for landscaping.

INITIAL VALUATIONS

 
Land $1,005,417
Land improvements $320,000
Building $7,845,426
Equipment $469,000
Furniture & fixtures $201,000

Interest Expense $523, 706

What would be the journal entries for this problem?

 

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