Pollachek Co. purchased land as a factory site for $447,200. The process of tear
ID: 2384712 • Letter: P
Question
Pollachek Co. purchased land as a factory site for $447,200. The process of tearing down two old buildings on the site and constructing the factory required 6 months. The company paid $46,956 to raze the old buildings and sold salvaged lumber and brick for $7,043. Legal fees of $2,068 were paid for title investigation and drawing the purchase contract. Pollachek paid $2,460 to an engineering firm for a land survey, and $76,024 for drawing the factory plans. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $1,677, and a liability insurance premium paid during construction was $1,006. The contractor's charge for construction was $3,063,320. The company paid the contractor in two installments: $1,341,600 at the end of 3 months and $1,721,720 upon completion. Interest costs of $190,060 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 Pollachek Co. Assume that the land survey was for the building.
Cost of land $
Cost of building $
Explanation / Answer
Cost of Land :- Purchase cost $447,200 Add: Legal fees $2,068 Add: Cost to raze the old buildings $46,956 Less : salvaged lumber and brick ($7,043) ---------------------------------------------------- Cost of Land : $489,181 Cost of building is : land survey 2460 Add: Fee for drawing the factory plans $76,024 Add : Title insurance on the property$1,677 Add: liability insurance premium $1,006 Add: construction Cost $3,063,320 Add: Interest costs $190,060 --------------------------------------- COst of Bldg $3,334,547.00