Phifer Landscaping Corp. capitalization of interest on construction of building
Phifer Landscaping Corp. purchased a parcel of land for $139,000. They also paid $2,000 for a survey and $4,000 in title insurance. An old dwelling on the land was demolished costing $3,000, with $1,000 being recovered from salvage materials on the demolished structure. $30,000 was paid for architect services and the building permit was $3,000. The following payments were made to the builder:
March 1, 2015 $240,000
May 1, 2015 $330,000
July 1, 2015 $60,000
The building was started on December 1, 2014 and completed on July 1, 2015.
Phifer borrowed $600,000 at 8% annual rate on December 1, 2014 specifically to fund this building project. The loan matures in 10 years.
1. What is the balance of land in 2014 and 2015?
2. What is the balance of building in 2014 and 2015?
3. What is the interest expense amount in 2014 and 2015?
4. Indicate the amount of interest Phifer should capitalize in 2014 and 2014 using the specific interest method.