Question

x Your answer is incorrect. Oriole Landscaping began construction of a new plant on December 1, 2020. On this date, the company purchased a parcel of land for $142,800 in cash. In addition, it paid $2,880 in surveying costs and $4,320 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, 2020, when the architect was paid $40,800. 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 2021 as follows. Date of Payment Amount of Payment March 1 $264,000 May 1 334,800 July 1 63,600 The building was completed on July 1, 2021. To finance construction of this plant, Oriole borrowed $603,600 from the bank on December 1, 2020. Oriole had no other borrowings. The $603,600 was a 10-year loan bearing interest at 9%. Compute the balance in each of the following accounts at December 31, 2020, and December 31, 2021. (Round answers to 0 decimal places, e.g. 5,275.) December 31, 2020 December 31, 2021 (a) Balance in Land Account 154080 154080 (b) Balance in Building 45647 243664 (c) Balance in Interest Expense 3040 32394

Answer 1

Answer

		december 31 2020	december 31 2021
(a)	balance in land account	152640	152640
(b)	balance in building account	44160	706560
(c)	balance in interest expense	4527	58851

note* i have assumed simple interest on loan

WORKING NOTES

land account 31 december 2020

date	particular	amount	date	particular	amount
dec1 2020	to cash	142800	1 dec 2020	by cash	720
dec1 2020	to survey cost	2880	31 dec 2020	by balance carried down	152640
dec 1 2020	to insurance policy	4320
dec 1 2020	to demolition expense	3360
		153360			153360

land account 31 december 2021

date	particular	amount	date	particular	amount
1 jan 2021	to balance brought down	152640	31 dec	by balance carried down	152640
		152640			152640
1 jan 2022	to balance brought down	152640

building account as on 31 december 2020

date	particular	amount	date	particular	amount
dec 1 2020	To architecture cost	40800	31 dec 2020	by balance carried down	44160
dec 1 2020	To building permit expense	3360
		44160			44160

building account as on 31 december 2021

date	particular	amount	date	particular	amount
1 jan 2021	to balance brought down	44160	31 december 2021	by balance carried down	706560
1 march 2021	to bank	264000
1 May 2021	to bank	334800
1 may 2021	to bank	63600
		706560			706560

interest expense account as on 31 december 2020

date	particular	amount	date	particular	amount
31 dec 2020	to balance carried down	4527	31 dec 2020	interest payable account (603600 *9% /12)	4527
		4527			4527

interest expense accounts on december 2021

date	particular	amount	date	particular	amount
31 dec 2021	to balance carried down	58851	1 jan 2021	by balance brought down	4527
			1 dec 2021	by interest payable account	49797
			31 dec 2021	by interest payable account	4527
		58851			58851

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