Question

On January 1, 2021, the Blackstone Corporation purchased a tract of land (site number 11) with a building for $740,000. Additionally, Blackstone paid a real estate broker's commission of $50,000, legal fees of $8,000, and title insurance of $25,000. The closing statement indicated that the land value was $570,000 and the building value was $170,000. Shortly after acquisition, the building was razed at a cost of $89,000. Blackstone entered into a $4,400,000 fixed-price contract with Barnett Builders, Inc., on March 1, 2021, for the construction of an office building on land site 11. The building was completed and occupied on September 30, 2022. Additional construction costs were incurred as follows: Plans, specifications, and blueprints $ 26,000 Architects' fees for design and supervision 98,000 To finance the construction cost, Blackstone borrowed $4,400,000 on March 1, 2021. The loan is payable in 10 annual installments of $440,000 plus interest at the rate of 12%. Blackstone's average amounts of accumulated building construction expenditures were as follows: For the period March 1 to December 31, 2021 $ 1,040,000 For the period January 1 to September 30, 2022 3,000,000 Required: Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site 11 as of September 30, 2022. Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2022.

Answer 1

Answer:

The answer is given below;

Explanation:

Land Account As at September 30,2022

                                                      Amount in $

Land Value                                    570,000

Broker Commission                        50,000

Legal Fees                                          8,000

Title Insurance                                  25,000

Cost of Razing                                  89,000

Total                                                742,000

Office Building-Total Cost            Amount in $

Contract price to barnett                  4,400,000

Plans and Blueprint                               26,000

Design and Supervision                        98,000

March-December 2021

Borrowing Costs 1,040,000*12%*9/12   93,600

January-September 2022

Borrowing Costs 3,000,000*12%*9/12   270,000

Total Cost                                                4,887,600