On January 2, 2018, Parrish Corporation purchased a tract ofland (site no. 505) with a building for $2,000,000. Parrish alsopaid the following fees to complete the purchase:
Real estate broker’s commission $75,000
Legalfees 25,000
Titleinsurance 40,000
Back taxes (paid to clear a lien) 20,000
The closing statement indicated the fair value of the land was$1,700,000 and the building’s fair value was $300,000. Immediatelyafter the purchase was finalized, the building was razed for atotal cost of $200,000.
On March 1, 2018, Brock entered into a $3,000,000 fixed-pricecontract with Bob the Builder, Inc. for the construction of anoffice building on land site #505. The building was completed andoccupied on October 31, 2019. Additional construction costsincurred in 2018 are as follows:
Architects fees for building plans and supervision ofconstruction $150,000
Construction plans, specifications, blueprints, permits andinspections 130,000
Parrish borrowed $2,500,00 on March 1, 2018 by issuing a notepayable to L$L Financial Institution. The note is payable in 10annual installments of $250,000 plus interest at a rate of 8%.Parrish’s weighted average accumulated expenditures for theconstruction project were as follows:
March 1 – December 31,2018 $1,100,000
January 1 – October 31,2019 2,500,000
Parrish estimates that the building will have a 40-year usefullife and a salvage value of $200,000. The building will bedepreciated using the DDB method. The building is put into use onNovember 1, 2019.
Required:
- Complete the schedule that shows the individual costsattributed to the Land account (#505).
- Complete the schedule the shows the individual costsattributed to the Building account.
- Compute depreciation expense for 2019 and 2020 for theBuilding.
