The company purchased land with a building for $1,250,000. At the time of the purchase, the fair value of the land was at $1,170,000 and the building at $80,000. Right after the purchase, the company had the old building removed at a cost of $24,000.
Additionally, the company incurred the following costs in connection with the land purchase:
· Real estate brokerage fees of $90,000.
· Land title fees of $45,000.
· Legal fees in the amount of $15,000 in connection with the land and old building purchase.
On June 1, 2017 the Company entered into a construction contract with the LHP Company to construct the new facility for a total cost of $7,500,000. In addition, the Company paid $257,500 in architect fees for the custom design and all planning and construction drawings of the new building. The building was completed and ready for occupancy on June 1, 2018. The building has an expected life of 37 years and will be depreciated using the 200% declining balance method of depreciation.
The YXA Company took a loan in the total amount of $7,500,000 to finance the costs of the new facility. The terms of the loan provide for 25 annual payments of $300,000 plus interest at 7%.
The weighted average accumulated building construction expenditures for the period March 1, 2017 through December 31, 2017 were $3,125,000. For the period January 1, 2018 through June 1, 2018 the weighted average accumulated building construction expenditures were $2,813,000.
Due to staff relocations and scheduling issues, the building was not actually occupied and did not begin production until December 1, 2018.
Instructions:
Prepare separate properly labeled schedules detailing the individual costs that should be capitalized in the land account and in the buildingaccount on the Companys balance sheet as of December 31, 2018 prior to recording any depreciation.