Question

On March 1, 2021, Beldon Corporation purchased land as a factory site for $64,000. An old building on the property was demolished, and construction began on a new building that was completed on December 15, 2021. Costs incurred during this period are listed below: Demolition of old building $ 6,000 Architect’s fees (for new building) 16,000 Legal fees for title investigation of land 4,000 Property taxes on land (for period beginning March 1, 2021) 3,400 Construction costs 540,000 Interest on construction loan 7,000 Salvaged materials resulting from the demolition of the old building were sold for $2,400. Required: Determine the amounts that Beldon should capitalize as the cost of the land and the new building.

Answer 1

Answer:

$638,000

Explanation:

The answer is simply the expenditure minus any selling from salvages.

First total Expenses(cost for land + cost for building) are as follow;

Land purchase: 64,000

Demolition: 6,000

Architect’s fees: 16,000

Legal fees for title investigation of land 4,000

Property taxes on land 3,400

Construction costs 540,000

Interest on construction loan 7,000.

.........................................................................

                     Total expenses = 64,000 +6,000+16,000+ 4,000+3,400+ 540,000 +7,000 = 640,400

                     Salvage sales = 2,400

                     Net Capital Cost = Total expenses - Salvage sales = $638,000