Grouper Landscaping began construction of a new plant on December 1, 2017. On th
ID: 2528000 • Letter: G
Question
Grouper Landscaping began construction of a new plant on December 1, 2017. On this date, the company purchased a parcel of land for $145,200 in cash. In addition, it paid $2,640 in surveying costs and $4,080 for a title insurance policy. An old dwelling on the premises was demolished at a cost of $3,360, with $720 being received from the sale of materials.
Architectural plans were also formalized on December 1, 2017, when the architect was paid $33,600. The necessary building permits costing $3,360 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.
Date of Payment
Amount of Payment
The building was completed on July 1, 2018.
To finance construction of this plant, Grouper borrowed $609,600 from the bank on December 1, 2017. Grouper had no other borrowings. The $609,600 was a 10-year loan bearing interest at 9%.
Compute the balance in each of the following accounts at December 31, 2017, and December 31, 2018. (Round answers to 0 decimal places, e.g. 5,275.)
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Date of Payment
Amount of Payment
March 1 $249,600 May 1 336,000 July 1 62,400Explanation / Answer
a) balance of land account
Purchase of land - $145,200
Survey Cost - $ 2640
Insurance Cost - $4080
Old dewelling demolished cost net of proceed received on sale of material - $2,640 (3360-720)
Cost of land - 154,560
Building cost
Architect fees - 33600
Building permit cost - 3360
Building cost in 1 Dec 2017 - 36,960
Additional payment in 2018 - 648000
Building cost on July 1 2018 - 684,960
Summary
Balance of land - 154,560 on 31st Dec 2017 and 154,560 on 31st Dec 2018 (Considering no depreciation)
Building WIP - 36,960 on 31st Dec 2017 and 684,960 on 31st Dec 2018 (Considering no depreciation)
Balance in Interest Exp
Loan borrowed on 1st Dec - 609,600
Interest - 609600*9%*1/12 = 4,572
Loan - 609600*9% = 54,864
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