Q1 (Classification of Costs and Interest Capitalization) On January 1, 2020, Blair Corporation

purchased for

$530,000

a tract of land (site number 101) with a building. Blair paid a real estate

brokers commission of

$38,000

, legal fees of

$3,700

, and title guarantee insurance

of

$4,300

. The closing statement indicated that the land value was

$500,000

and the building value was

$100,000

. Shortly after acquisition, the building was

razed at a cost of

$32,000

Blair entered into a contract with Slatkin Builders, Inc. on March 1, 2020, for the construction of an office building on land site number 101. The building was completed and occupied on Dec 31, 2020. Additional construction costs were incurred as follows:

To finance construction costs, Blair borrowed

$1,000,000

on March 1, 2020. The loan

is payable in

10

years in a single sum of

$1,000,000

plus annual interest at

12%

, which will be paid at March 1.

Other debt includes a 20-year notes payable of

$2,000,000

issued on January 1,2010, with

an annula interest at

10%

.

Blair's building construction expenditures were as follows:

March 1, 2020: Plans and architects fees

$750,000

May 1, 2020: Construction cost

$1,200,000

Oct 1, 2020: Construction cost

$600,000

Dec 31, 2020: Construction cost

$900,000

Instructions:

(a) Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site number 101 as of Dec 31, 2020.

BLAIR CORPORATION

Cost of Land (Site #101)

As of Dec 31, 2020

Cost of land and old building

Real estate broker's commission

Legal Fees

Title Insurance

Removal of old building

Cost of land

(b) Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of Dec 31, 2020. Show supporting computations in good form.

Fixed construction contract price

Plans, specifications, and blueprints

Architect fees

BLAIR CORPORATION

Cost of Building

As of Dec 31, 2020

Construction cost

Interest capitalized during 2020

Cost of building