During the year, Sloan Inc. began a project to construct newcorporate headquarters. Sloan purchased land with an existingbuilding for $750,000. The land was valued at $700,000 and thebuilding at $50,000. Sloan planned to demolish the building andconstruct a new office building on the site.
1. | Classify as land and do not depreciate. |
2. | Classify as building and depreciate. |
3. | Expense. |
4. | Capitalized |
5. | Expensed as a period cost |
Purchase of land for $700,000 |
Interest of $147,000 on construction financing incurred aftercompletion of construction |
Interest of $186,000 on construction financing paid duringconstruction |
Purchase of building for $50,000 |
$18,500 payment of delinquent real estate taxes assumed by Sloanon purchase |
$12,000 liability insurance premium during the constructionperiod |
$65,000 cost of razing existing building |
Moving costs of $136,000 |
Freight-in charges paid for goods held for resale |
In-transit insurance on goods held for resale purchased F.O.B.shipping point |
Interest on note payable for goods held for resale |
Installation of equipment |
Testing of newly purchased equipment |
Cost of current year service contract on equipment |
