Lighthouse Ltd acquired land for the purpose of building Lighthouse Point, a health and beauty spa. The following costs were incurred:

The original buildings on the site were removed by Lighthouse Ltd and sold for $50 000.

REQUIRED

a. Determine the cost of the Lighthouse Point health and beauty spa.

b. Allocate costs between land and building so that a depreciable cost can be determined for the buildings. (It is not necessary to calculate depreciation.) Identify those items for which an arbitrary or estimated allocation between land and building was required.

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Purchase price of land paid in cash Stamp duty and legal fees Removal of pre-existing buildings Application to local government bodies for development Expenses incurred in evaluating a different site found to be unsuitable Architects' fees $1 000 000 $80 000 $20 000 $10 000 $30 000 $100 000 Construction of spa buildings $1 500 000 Salary of manager overseeing the Lighthouse Point project for 18 months $120 000 Borrowing costs (interest) incurred in relation to the project $180 000