Problem 10-5 (Part Level Submission) (a) SWIFTY CORPORATION Cost of Land (Site #

Question

Problem 10-5 (Part Level Submission)

(a)

SWIFTY CORPORATION
Cost of Land (Site #101)
As of September 30, 2018

Problem 10-5 (Part Level Submission)

On January 1, 2017, Swifty Corporation purchased for $600,000 a tract of land (site number 101) with a building. Swifty paid a real estate broker’s commission of $43,200, legal fees of $7,200, and title guarantee insurance of $21,600. The closing statement indicated that the land value was $600,000 and the building value was $120,000. Shortly after acquisition, the building was razed at a cost of $64,800.

Swifty entered into a $3,600,000 fixed-price contract with Slatkin Builders, Inc. on March 1, 2017, for the construction of an office building on land site number 101. The building was completed and occupied on September 30, 2018. Additional construction costs were incurred as follows.
Plans, specifications, and blueprints $25,200 Architects’ fees for design and supervision 98,400
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, Swifty borrowed $3,600,000 on March 1, 2017. The loan is payable in 10 annual installments of $360,000 starting on March 1, 2018, plus interest at the rate of 10%. Swifty’s weighted-average amounts of accumulated building construction expenditures were as follows.
For the period March 1 to December 31, 2017 $1,560,000 For the period January 1 to September 30, 2018 2,280,000

Explanation / Answer

Ans 1 Cost of Land (Site #101) As of September 30, 2018 Cost of Land and old building $600,000 Real estate broker Commission $43,200 Title Insurance $21,600 Legal Fees $7,200 Removal of Old Building $64,800 Cost of land $736,800

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