Beldon Corporation purchased land as a factory site for S63.DOO. An ok) building

Question

Beldon Corporation purchased land as a factory site for S63.DOO. An ok) building on the property was demolished, and construction began on a new building that was completed on December 15. 2016. Costs incurred during this period are listed below: Salvaged materials resulting from the demolition of the old building were sold for $2.300. Determine the amounts that Beldon should capitalize as the cost of the land. (Amounts to be deducted should be indicated with a minus sign.) Determine the amounts that Beldon should capitalize as the cost of the new building.

Explanation / Answer

Computation of the Capitalize cost of the land and New Building

Cost of land:

Particulars                               Amount

Land                                         $ 63,000

Demolition                               $ 5,500

Legal fees                               $ 3,500

Salvage materials $ (2,300)

Cost of Land                          $ 69,700

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Cost of building:

Particulars                                          Amount

Construction costs $ 530,000

Interest on construction loan $ 6,500
Architect $ 15,000

Cost of Building $ 551,500

Property tax is recurring Expenditure ,hence it should be expensed out ,should not be capitalized.

Hence the cost of building and cost of land is $ 551,500 $ 69,700

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