Question Details

What amount of overhead should be included in the cost of the self-constructed asset 



Use the following information for questions 1-3.

La Bianco Company purchased land for a manufacturing facility for €1,100,000. The company paid €70,000 to tear down a building on the land. Salvage was sold for €10,500. Legal fees of €6,500 were paid for title investigation and making the purchase. Architect's fees were €40,500. Title insurance cost €4,500, and liability insurance during construction cost €13,500. Excavation cost €12,000. The contractor was paid €1,357,000. A one -time assessment made by the city for sidewalks was €7,500. La Bianca installed lighting and signage at a cost of €11,000.

	1.	The cost of the land that should be recorded by La Bianca is
a.	€1,195,000.
b.	€1,178,000.
c.	€1,103,500.
d.	€1,006,500.

	2.	The cost of the building that should be recorded by La Bianca is
a.	€1,505,500.
b.	€1,432,000.
c.	€1,423,000.
d.	€1,357,500.

	3.	La Bianca should record land improvements of
a.	€-0-.
b.	€11,000.
c.	€18,500.
d.	€23,000.

 
	4.	Istandul Enterprise constructed a building at a cost of TL24,000,000. Average accumulated expenditures were TL17,000,000, actual interest was TL2,120,000, and avoidable interest was TL1,600,000. If the salvage value is TL4,600,000, and the useful life is 30 years, depreciation expense for the first full year using the straight-line method is
a.	TL700,000.
b.	TL717,733.
c.	TL800,000.
d.	TL870,667.

	5.	During self-construction of an asset by Samuelson Company, the following were among the costs incurred:
Fixed overhead for the year	$1,000,000
Portion of $1,000,000 fixed overhead that would
	be allocated to asset if it were normal production	40,000
Variable overhead attributable to self-construction	35,000
	What amount of overhead should be included in the cost of the self-constructed asset ? 
a.	$   -0-
b.	$35,000
c.	$40,000
d.	$75,000


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