Merrick Inc. purchased land as a factory site for $512,000. The process of tearing down an old warehouse on the site and constructing the factory required 5 months. The company paid $52,300 to demolish the old warehouse and sold salvaged materials for $6,950. Legal fees of $2,450 were paid for the title investigation and drafting the purchase contract. Merrick paid $3,100 to an engineering firm for a land survey and $85,200 for drawing the factory plans. The land survey had to be completed before definitive plans could be drawn. Title insurance on the property cost $2,020, and a liability insurance premium paid during construction was $1,320. The contractor's charge for construction was $3,478,500. The company paid the contractor in two installments: $1,500,000 at the end of 3 months and $1,978,500 upon completion. Interest costs of $210,600 were incurred to finance the construction. Determine the cost of the land and the cost of the building as they should be recorded on the books of Merrick Inc. Assume that the land survey was for the building.
Merrick Inc. purchased land as a factory site for $512,000. The process of tearing down an old warehouse on the site and constructing the factory required 5 months. The company paid $52,300 to demolish the old warehouse and sold salvaged materials for $6,950. Legal fees of $2,450 were paid for the title investigation and drafting the purchase contract. Merrick paid $3,100 to an engineering firm for a land survey and $85,200 for drawing the factory plans. The land survey had to be completed before definitive plans could be drawn. Title insurance on the property cost $2,020, and a liability insurance premium paid during construction was $1,320. The contractor's charge for construction was $3,478,500. The company paid the contractor in two installments: $1,500,000 at the end of 3 months and $1,978,500 upon completion. Interest costs of $210,600 were incurred to finance the construction. Determine the cost of the land and the cost of the building as they should be recorded on the books of Merrick Inc. Assume that the land survey was for the building.
Chapter9: Acquisitions Of Property
Section: Chapter Questions
Problem 46P
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Determine the cost of the land and the cost of the building as they should be recorded on the books of Merrick Inc. assumed that the land survey was for the building.
Transcribed Image Text:Merrick Inc. purchased land as a factory site for $512,000. The process of tearing down an old warehouse
on the site and constructing the factory required 5 months.
The company paid $52,300 to demolish the old warehouse and sold salvaged materials for $6,950. Legal
fees of $2,450 were paid for the title investigation and drafting the purchase contract. Merrick paid $3,100
to an engineering firm for a land survey and $85,200 for drawing the factory plans. The land survey had
to be completed before definitive plans could be drawn. Title insurance on the property cost $2,020, and
a liability insurance premium paid during construction was $1,320. The contractor's charge for
construction was $3,478,500. The company paid the contractor in two installments: $1,500,000 at the end
of 3 months and $1,978,500 upon completion. Interest costs of $210,600 were incurred to finance the
construction.
Determine the cost of the land and the cost of the building as they should be recorded on the books of
Merrick Inc. Assume that the land survey was for the building.
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