Intermediate accounting 2

Cost of Land and Building

Alliah Company purchases land with an existing building. The plan is to demolish the existing building and construct a new building for Alliah's use. The CFO has asked Dylan to calculate several amounts related to the transactions. The details of the transaction are provided in the worksheet.

In the table G9:J14, calculate the cost of Land (Site #101) as of September 30, 2021.

1. Choose appropriate expense titles in column G.
2. In column J, reference the appropriate expense amount for the item from given information.
3. If any rows are not necessary, leave them blank.

In the table H26:M27, calculate the interest to be capitalized (avoidable interest).

1. In column I, indicate the weighted-average appropriate accumulated expenditure amounts.
2. In column K, indicate the appropriate interest rate.
3. In column M, calculate the interest to be capitalized (avoidable interest).
4. Hint: The weighted-average accumulated expenditures is already given.

Using the table H32:O36, calculate the amount of actual interest to be paid.

1. In Column I, select (if necessary, calculate) the appropriate debt balance.
2. In column K, select the appropriate interest rate.
3. In column M, determine the appropriate fraction of a year to which the debt balance applies. Hint: Utilize an Excel formula to create a decimal number that can be used in a calculation; using a fraction will result in an autocorrected date format.
4. In column M, calculate the amount of actual interest to be paid in 2020 and 2021.

Using the table G41:J47, calculate the cost of Alliah Company's new building as of September 30, 2021.

1. Choose appropriate expense titles in column G.
2. In column J, reference the appropriate expense amount for the item from given information.
3. If any rows are not necessary, leave them blank.

Drop down menu:

Architects fees

Building value

Cost of land and old building

Fixed construction contact price

Interest capitalized during 2020

Interest capitalized during 2021

Land value

Legal fees

Plans specifications and blueprints

Real estate brokers commission

Removal of old building

Title insurance

B D E F E G H 1 J K L M N O P Q R S Instructions: Prepare a schedule that discloses the individual costs making up the balance in the land account for land site number 101 as of September 30, 2020. 4 A 1 2 3 4 5 6 7 7 8 9 10 11 12 13 74 15 16 17 18 19 20 21 22 ALLIAH COMPANY Cost of Land (Site #101) As of September 30, 2021 During January, Alliah Company incurred transactions and provided the information that follows: Purchase of a tract of land (site number 101) with a building on January 1, 2020 $ 600.000 Payment of real estate broker's commission $ 48,000 Legal fees $ 6,000 Title guarantee insurance $ 18,000 Land value indicated on the closing statement $ 600,000 Building value indicated on the closing statement $ 100,000 Cost to raze the building shortly after acquisition $ 56,000 $ 4,000,000 Cost of land $ Entered into a fixed-price contract with Slatkin Builders, Inc. on March 1, 2020, for the construction of an office building on land site number 101. The building was Additional construction costs were incurred as follows: Plans, specifications, and blueprints Architects' fees for design and supervision $ $ 24,000 80,000 Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2021. Show supporting computations in good form. Calculation of capitalized interest Estimated useful life of the building from date of completion 40 years Interest to be capitalized: Depreciation method used for building (declining balance) Weighted Average Accumulated Expenditure Interest to be Capitalized (Avoidable Interest) Interest Rate 4,000,000 = 2020 2021 X X = Borrowing to finance construction costs on March 1, 2020 $ Payment terms on loan: Number of installment payments Amount of each annual installment, plus interest, $ starting March 1, 2021 Interest rate 10 400,000 Actual interest: 10% Interest Rate Loan Balance 2020 Fraction Interest Paid X X = 2021 X Weighted average amounts of accumulated building construction expenditures: For the period March 1 to December 31, 2020 For the period January 1 to September 30, 2021 X X X 1,800,000 2,400,000 $ $ Total interest for 2020 and 2021 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 | 42 43 44 45 46 47 48 49 50 51 52 53 54 55 ALLIAH COMPANY Cost of Building As of September 30, 2021 Cost of building $