Metlock Landscaping began construction of a new plant on December 1, 2017. On th
ID: 2526637 • Letter: M
Question
Metlock Landscaping began construction of a new plant on December 1, 2017. On this date, the company purchased a parcel of land for $145,200 in cash. In addition, it paid $2,640 in surveying costs and $4,080 for a title insurance policy. An old dwelling on the premises was demolished at a cost of $3,360, with $720 being received from the sale of materials.
Architectural plans were also formalized on December 1, 2017, when the architect was paid $33,600. The necessary building permits costing $3,360 were obtained from the city and paid for on December 1 as well. The excavation work began during the first week in December with payments made to the contractor in 2018 as follows.
Date of Payment
Amount of Payment
The building was completed on July 1, 2018.
To finance construction of this plant, Metlock borrowed $609,600 from the bank on December 1, 2017. Metlock had no other borrowings. The $609,600 was a 10-year loan bearing interest at 9%.
Compute the balance in each of the following accounts at December 31, 2017, and December 31, 2018. (Round answers to 0 decimal places, e.g. 5,275.)
Date of Payment
Amount of Payment
March 1 $249,600 May 1 336,000 July 1 62,400Explanation / Answer
Balance of Land 31-Dec-17 Purchase price $145,200 Survey cost 2640 Title Insurance 4080 Demolition cost 3360 Salvage of material -720 Cost of Land $154,560 31-Dec-17 Cost of Building Architect fees $33,600 permit cost $3,360 Interest capitalized 1436 (154560+33600+3360)*1/12*9% Balance in building $38,396 Expenditure Months Weighted avg exp $192,956 6/12 $96,478 (154560+38396) 249600 4/12 83200 336000 2/12 56000 62400 0/12 0 $235,678 Interest capitalized 235678*9% 21211 Building balance as on 31 Dec 2018 $707,607 38396+249600+336000+62400+21211 ans 31-Dec-17 31-Dec-18 (a) Balance in Land Account $154,560 $154,560 (b) Balance in Building $38,396 $707,607 (c) Balance in Interest Expense 3132 33599 (609000*9%*1/12)-1436 (609000*9%)-21211