On January 1, 2021, the Blackstone Corporation purchased a tract of land (site number 11) with a building for $760,000. Additionally, Blackstone paid a real estate broker's commission of $52,000, legal fees of $9,000, and title insurance of $26,000. The closing statement indicated that the land value was $580,000 and the building value was $180,000. Shortly after acquisition, the building was razed at a cost of $91,000. Blackstone entered into a $4,600,000 fixed-price contract with Barnett Builders, Inc., on March 1, 2021, for the construction of an office building on land site 11. The building was completed and occupied on September 30, 2022. Additional construction costs were incurred as follows: Plans, specifications, and blueprints Architects' fees for design and supervision $ 28,000 100,000 To finance the construction cost, Blackstone borrowed $4,600,000 on March 1, 2021. The loan is payable in 10 annual installments of $460,000 plus interest at the rate of 12%. Blackstone's average amounts of accumulated building construction expenditures were as follows: For the period March 1 to December 31, 2021 For the period January 1 to September 30, 2022 $1,060,000 3,100,000 Required: 1. Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site 11 as of September 30, 2022. 2. Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2022.
On January 1, 2021, the Blackstone Corporation purchased a tract of land (site number 11) with a building for $760,000. Additionally, Blackstone paid a real estate broker's commission of $52,000, legal fees of $9,000, and title insurance of $26,000. The closing statement indicated that the land value was $580,000 and the building value was $180,000. Shortly after acquisition, the building was razed at a cost of $91,000. Blackstone entered into a $4,600,000 fixed-price contract with Barnett Builders, Inc., on March 1, 2021, for the construction of an office building on land site 11. The building was completed and occupied on September 30, 2022. Additional construction costs were incurred as follows: Plans, specifications, and blueprints Architects' fees for design and supervision $ 28,000 100,000 To finance the construction cost, Blackstone borrowed $4,600,000 on March 1, 2021. The loan is payable in 10 annual installments of $460,000 plus interest at the rate of 12%. Blackstone's average amounts of accumulated building construction expenditures were as follows: For the period March 1 to December 31, 2021 For the period January 1 to September 30, 2022 $1,060,000 3,100,000 Required: 1. Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site 11 as of September 30, 2022. 2. Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2022.
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 55P
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Transcribed Image Text:On January 1, 2021, the Blackstone Corporation purchased a tract of land (site number 11) with a building
for $760,000. Additionally, Blackstone paid a real estate broker's commission of $52,000, legal fees of
$9,000, and title insurance of $26,000. The closing statement indicated that the land value was $580,000
and the building value was $180,000. Shortly after acquisition, the building was razed at a cost of $91,000.
Blackstone entered into a $4,600,000 fixed-price contract with Barnett Builders, Inc., on March 1, 2021, for
the construction of an office building on land site 11. The building was completed and occupied on
September 30, 2022. Additional construction costs were incurred as follows:
Plans, specifications, and blueprints
Architects' fees for design and supervision
$ 28,000
100,000
To finance the construction cost, Blackstone borrowed $4,600,000 on March 1, 2021. The loan is payable
in 10 annual installments of $460,000 plus interest at the rate of 12%. Blackstone's average amounts of
accumulated building construction expenditures were as follows:
For the period March 1 to December 31, 2021
For the period January 1 to September 30, 2022
$1,060,000
3,100,000
Required:
1. Prepare a schedule that discloses the individual costs making up the balance in the land account in
respect of land site 11 as of September 30, 2022.
2. Prepare a schedule that discloses the individual costs that should be capitalized in the office building
account as of September 30, 2022.
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