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slamgirl [31]
3 years ago
6

Kieu Corporation constructs a new warehouse. It pays $100,000 for materials and $70,000 to the general contractor. Architectural

fees total $18,000. The corporation pays $13,000 in interest on its loan to finance construction. The land costs $15,000, and the real estate taxes paid on the land during construction amount to $1,000. What is Kieu's initial basis in the warehouse?
Business
1 answer:
garik1379 [7]3 years ago
8 0

Answer:

$204,000

Explanation:

Initial cost basis is the amount of cost capitalized in the purchase of an asset for tax and other purposes.It consists of purchase price , development fees , professional fees  estate taxes and others.

Please note that finance cost is not included as it is recorded as expenses over the life of the loan.

Workings

Materials - $100,000

Contractor fees - $70,000

Architectural fees - $ 18,000

Cost of land  $ 15,000

Estate taxes - $1000

Total cost =$204,000

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                                    $

Material used            2,500                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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The overhead applied is the difference between cost of goods sold and cost of material used and direct labour. The cost of goods sold is $7,700 while the cost of material and labour is $7,500. The difference of $200       represents the overhead applied.                                                                                                                                                                                                                                                

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