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In: Accountingarly in its fiscal year ending December 31, 2018, San AntonioOutfitters finalized plans to expand...arly in its fiscal year ending December 31, 2018, San AntonioOutfitters finalized plans to expand operations. The first stagewas completed on March 28 with the purchase of a tract of land onthe outskirts of the city. The land and existing building werepurchased for $1,200,000. San Antonio paid $400,000 and signed anoninterest-bearing note requiring the company to pay the remaining$800,000 on March 28, 2020. An interest rate of 9% properlyreflects the time value of money for this type of loan agreement.Title search, insurance, and other closing costs totaling $40,000were paid at closing. During April, the old building was demolished at a cost of $90,000,and an additional $70,000 was paid to clear and grade the land.Construction of a new building began on May 1 and was completed onOctober 29. Construction expenditures were as follows: (FV of $1,PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tablesprovided.)May 1$4,200,000July 302,500,000September 12,100,000October 13,000,000San Antonio borrowed $6,700,000 at 9% on May 1 to help financeconstruction. This loan, plus interest, will be paid in 2019. Thecompany also had the following debt outstanding throughout2018:$4,000,000, 10% long-term note payable$6,000,000, 7% long-term bonds payableIn November, the company purchased 10 identical pieces of equipmentand office furniture and fixtures for a lump-sum price of $800,000.The fair values of the equipment and the furniture and fixtureswere $675,000 and $225,000, respectively. In December, San Antoniopaid a contractor $385,000 for the construction of parking lots andfor landscaping. Required:1. Determine the initial values of the variousassets that San Antonio acquired or constructed during 2018. Thecompany uses the specific interest method to determine the amountof interest capitalized on the building construction.2. How much interest expense will San Antonioreport in its 2018 income statement?