Interest During Construction- Grieg Landscaping began construction of a new plant on December 1, 2017. On this date, the company purchased a parcel of land for $139,000 in cash. In addition, it paid $2,000 in surveying costs and $4,000 for a title insurance policy. An old dwelling on the premises was demolished at a cost of $3,000, with $1,000 being received from the sale of materials.
Architectural plans were also formalized on December 1, 2017, when the architect was paid $30,000. The necessary building permits costing $3,000 were obtained from the city and paid for on December 1 as well. The excavation work began during the first week in December with payments made to the contractor in 2018 as follows.
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Date of Payment
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Amount of Payment
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March 1
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$240,000
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May 1
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330,000
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July 1
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60,000
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The building was completed on July 1, 2018.
To finance construction of this plant, Grieg borrowed $600,000 from the bank on December 1, 2017. Grieg had no other borrowings. The $600,000 was a 10-year loan bearing interest at 8%.
Instructions
Compute the balance in each of the following accounts at December 31, 2017, and December 31, 2018. (Round amounts to the nearest dollar.) Provide all numbers to do the calculations.
(a) Land.
(b) Buildings.
(c) Interest Expense.