Early in its fiscal year ending December 31, 2021, San Antonio Outfitters finalized plans to expand operations. The first stage was completed on March 28 with the purchase of a tract of land on the outskirts of the city. The land and existing building were purchased by
paying $370,000 immediately and signing a noninterest-bearing note requiring the company to pay $770,000 on March 28, 2023. An
interest rate of 8% properly reflects the time value of money for this type of loan agreement. Tide search, insurance, and other closing
costs totaling $37.000 were paid at closing
At the end of April, the old building was demolished at a cost of $87,000, and an additional $67.000 was paid to clear and grade the
land. Construction of a new building began on May 1 and was completed on October 29. Construction expenditures were as follows
(FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
May 1
July 30
September 1
October 1
$3,750,000
2,350.000
1,920,000
2,820.000
San Antonio borrowed $6,100,000 at 8% on May 1 to help finance construction. This loan, plus interest, will be paid in 2022. The
company also had a $6,950,000, 8% long-term note payable outstanding throughout 2021
In November, the company purchased 10 identical pieces of equipment and office furniture and fortures for a lump-sum price of
$770 000. The fair values of the equipment and the fumiture and fixtures were $522,000 and $348,000, respectively. In December, San
Antonio paid a contractor $370,000 for the construction of parking lots and for landscaping.
Required:
1. Determine the initial values of the various assets that San Antonio acquired or constructed during 2021. The company uses the
specific interest method to determine the amount of interest capitalized on the building construction. (Hint: Expenditures on March 28
and April 30 to acquire land on which to construct the building are included as part of accumulated expenditures for determining the
amount of interest capitalized on the building. This means the interest capitalization period begins on March 28.)
2. How much interest expense will San Antonio report in its 2021 income statement?
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Required 2
Determine the initial values of the variou assets that San Antonio acquired or constructed during 2021. The company uses
the specific interest method to determine the amount of interest capitalized on the building construction. (Hint: Expenditures
on March 28 and April 30 to acquire land on which to construct the building are included as part of accumulated expenditures
for determining the amount of interest capitalized on the building. This means the interest capitalization period begins on
March 28.) (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)