On January 1, 2014, Blair Corporation purchased for $1,176,500 a tract of land (

Question

On January 1, 2014, Blair Corporation purchased for $1,176,500 a tract of land (site number 101) with a building. Blair paid a real estate broker’s commission of $84,708, legal fees of $14,118, and title guarantee insurance of $42,354. The closing statement indicated that the land value was $1,176,500 and the building value was $235,300. Shortly after acquisition, the building was razed at a cost of $127,062.

Blair entered into a $7,059,000 fixed-price contract with Slatkin Builders, Inc. on March 1, 2014, for the construction of an office building on land site number 101. The building was completed and occupied on September 30, 2015. Additional construction costs were incurred as follows.

The building is estimated to have a 40-year life from date of completion and will be depreciated using the 150% declining-balance method.

To finance construction costs, Blair borrowed $7,059,000 on March 1, 2014. The loan is payable in 10 annual installments of $705,900 starting on March 1, 2015, plus interest at the rate of 10%. Blair’s weighted-average amounts of accumulated building construction expenditures were as follows.

A)Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site number 101 as of September 30, 2015.

BLAIR CORPORATION
Cost of Land (Site #101)
As of September 30, 2015

Link to Text

Plans, specifications, and blueprints $49,413 Architects’ fees for design and supervision 192,946

Explanation / Answer

The individual costs that would make up the balance in the land account in respect of land site number 101 as of September 30, 2015 are given below:

All the costs incurred in transferring the land's ownership to Blair will be included in the cost of land. Therefore, we will consider the broker’s commission, legal fees and title guarantee insurance will form part of the cost of land.

Similarly, the cost for razing the old building would be treated as cost incurred with respect to making the land available for use.

BLAIR CORPORATION
Cost of Land (Site #101)
As of September 30, 2015 Cost of Land and Old Building 1,176,500 Real Estate Broker's Commission 84,708 Legal Fees 14,118 Title Insurance 42,354 Removal of Old Building 127,062 Cost of Land $1,444,742

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