Question

Bonita Co. purchased land as a factory site for $512,000. The process of tearing down two old buildings on the site and constructing the factory required 6 months. The company paid $53,760 to raze the old buildings and sold salvaged lumber and brick for $8,064. Legal fees of $2,368 were paid for title Investigation and drawing the purchase contract. Bonita paid $2,816 to an engineering form for a land survey, and $87,040 for drawing the factory plans. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $1,920, and a liability insurance premium paid during construction was $1,152. The contractor's charge for construction was $3,507,200. The company paid the contractor in two installments: $1,536,000 at the end of 3 months and $1,971,200 upon completion. Interest costs of $217,600 were incurred to finance the construction, Determine the cost of the land and the cost of the building as they should be recorded on the books of Bonita Co. Assume that the land survey was for the building Cost of the Land Cost of the Building $ $

Answer 1

1
	Land	Building
Purchase cost	512000
Razing Costs	53760
Less: Salvaged materials	-8064
Legal Fees	2368
Land Survey		2816
Factory plans		87040
Title Insurance	1920
Liability Insurance		1152
Construction cost		3507200
Interest		217600
Total	561984	3815808
Cost of the Land	561984
Cost of the Building	3815808
2
	Land	Building
Purchase cost	480000
Razing Costs	50400
Less: Salvaged materials	-7560
Legal Fees	2220
Land Survey		2640
Factory plans		81600
Title Insurance	1800
Liability Insurance		1080
Construction cost		3288000
Interest		204000
Total	526860	3577320
Cost of the Land	526860
Cost of the Building	3577320