DAEBAK Landscaping began construction of a new plant on December 1, 2019. On this date, the company purchased a parcel of land for $556,000 in cash. In addition, it paid $8,000 in surveying costs and $16,000 for a title insurance policy. An old dwelling on the premises was demolished at a cost of $12,000, with $4,000 being received from the sale of materials. Architectural plans were also formalized on December 1, 2019, when the architect was paid $120,000. The necessary building permits costing $12,000 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 2020 as follows. Date of Payment Amount of Payment March 1 $ 960,000 May 1 1,320,000 July 1 240,000 The building was completed on July 1, 2020. To finance construction of this plant, DAEBAK borrowed $2,400,000 from the bank on December 1, 2019. DAEBAK had no other borrowings. The $2,400,000 was a 10-year loan bearing interest at 8%. Instructions: Compute the balance in each of the following accounts at December 31, 2019, and December 31, 2020. land buildings Interest expense
DAEBAK Landscaping began construction of a new plant on December 1, 2019. On this date, the company purchased a parcel of land for $556,000 in cash. In addition, it paid $8,000 in surveying costs and $16,000 for a title insurance policy. An old dwelling on the premises was demolished at a cost of $12,000, with $4,000 being received from the sale of materials.
Architectural plans were also formalized on December 1, 2019, when the architect was paid
$120,000. The necessary building permits costing $12,000 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 2020 as follows.
|
Date of Payment |
Amount of Payment |
|
March 1 |
$ 960,000 |
|
May 1 |
1,320,000 |
|
July 1 |
240,000 |
The building was completed on July 1, 2020.
To finance construction of this plant, DAEBAK borrowed $2,400,000 from the bank on December 1, 2019. DAEBAK had no other borrowings. The $2,400,000 was a 10-year loan bearing interest at 8%.
Instructions:
Compute the balance in each of the following accounts at December 31, 2019, and December 31, 2020.
- land
- buildings
- Interest expense
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