AC 302 CHAPTER 10 PROBLEM QUESTION 5

AC 302 CHAPTER 10 PROBLEM QUESTION 5
Name				Date		
Instructor				Course		
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
P10-5 (Classification of Costs and Interest Capitalization) On January 1, 2012, Blair Corporation 						
purchased for	$500,000 	a tract of land (site number 101) with a building. Blair paid a real estate 				
broker- commission of		$36,000 	, legal fees of	$6,000 	, and title guarantee insurance	
of	$18,000 	. The closing statement indicated that the land value was				
$500,000 	and the building value was		$100,000 	. Shortly after acquisition, the building was		
razed at a cost of		$54,000 				
Blair entered into a		$3,000,000 	fixed-price contract with Slatkin Builders, Inc. on 			
March 1, 2012, for the construction of an office building on land site number 101. The building was completed and occupied on September 30, 2013. Additional construction costs were incurred as follows:						
						
						
	Plans, specifications, and blueprints				$21,000 	
	Architects fees for design and supervision				$82,000 	
The building is estimated to have a			40 	year life from date of completion and will be		
depreciated using the		150%	declining balance method.			
To finance construction costs, Blair borrowed				$3,000,000 	on March 1, 2012. The loan	
is payable in 	10 	annual installments of		$300,000 	plus interest at the rate of	
10%	Blair's weighted-average amounts of accumulated building construction expenditures					
were as follows:						
	For the period March 1 to December 31, 2012				$1,300,000 	
	For the period January 1 to September 30, 2013				$1,900,000 	
						
Instructions:						
"(a) Prepare a schedule that discloses the individual costs making up the balance in the land account
     in respect of land site number 101 as of September 30, 2013."						
						
						
	BLAIR CORPORATION					
	Cost of Land (Site #101)					
	As of September 30, 2013					
	Text Title				Amount	
	Text Title				Amount	
	Text Title				Amount	
	Text Title				Amount	
	Text Title				Amount	
	Cost of land				Formula	
						
"(b) Prepare a schedule that discloses the individual costs that should be capitalized in the office
     building account as of September 30, 2013. Show supporting computations in good form."						
						
						
BLAIR CORPORATION						
Cost of Building						
As of September 30, 2013						
Text Title						Amount
Text Title						Amount
Text Title						Amount
Text Title						Amount
Text Title						Amount
Cost of building						Formula
						
Interest to be capitalized:						
2012 	Amount	×	Percentage	=	Formula	
2013 	Amount	×	Percentage	=	Formula