On March 1, 2021, Beldon Corporation purchased land as a factory site for $60,000. An old building on the property was demolished, and construction began on a new building that was completed on December 15, 2021. Costs incurred during this period are listed below: Demolition of old building $ 4,000 Architect’s fees (for new building) 12,000 Legal fees for title investigation of land 2,000 Property taxes on land (for period beginning March 1, 2021) 3,000 Construction costs 500,000 Interest on construction loan 5,000 Salvaged materials resulting from the demolition of the old building were sold for $2,000. Required: Determine the amounts that Beldon should capitalize as the cost of the land and the new building.

The amount that Beldon should capitalize as the cost of the land is $64,000 and as the cost of the new building is $517,000.

Explanation:

Capitalized cost of land

Purchase price                                     $60,000

Demolition of old building       $4,000  

Less: Sale of materials               $2,000     $2,000

Legal fees for title investigation              $2,000

Total cost of land                                      $64,000

Capitalized cost of building :

Construction costs                    $500,000

Architect's fees                    $12,000

Interest on construction loan          $5,000

Total cost of building             $517,000

Therefore, The amount that Beldon should capitalize as the cost of the land is $64,000 and as the cost of the new building is $517,000.

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