Question

Martin Buber Co. tore down two old buildings on land it purchased as a factory site. The process of tearing down and constructing the factory required 6 months. The company incurred the following costs and acquisitions during the year:
							Purchased land as a factory site				$400,000
	Payment to raze old buildings				42,000
	Sale of salvaged lumber and brick from razing				6,300
	Legal fees paid for title investigation and drawing the purchase contract				1,850
	Payment to an engineering firm for a land survey				2,200
	(Survey had to be made before definitive plans could be drawn.)
	Payment for drawing the factory plans				68,000
	Title insurance on the property				1,500
	Liability insurance premium during construction				900
	Contractor’s charge for construction				2,740,000
	Payment to the contractor - first installment @ end of 3 months				1,200,000
	Payment to the contractor - second installment upon completion				1,540,000
	Interest costs incurred to finance the construction				170,000
Instructions:
Determine the cost of the land and the cost of the building as they should be recorded on the books of Martin Buber Co. Assume that the land survey was for the building.

Answer 1