P10-6 Interest during Construction
Greig Landscaping began construction of a new plant on December 1,2012. On this date, the company purchased a parcel of land for $139,000 in cash. In addition it paid $2,000 in survey cost and $4,000 for title insurance policy. An old dwelling on the premises was demolished at a cost of $3,000 with $1,000 being received from the sale of materials.
Architectural plans were also on December 1, 2012 when the architect was paid $30,000. The necessary building permits costing $3,000 were obtained from the city and paid for on December 1 as well. The excavation work began during the first week in December with payments made to the contractor as follows:
Date of payment Amount of payment
March 1 240,000
May 1 330,000
July 1 60,000
The building was completed on July 1, 2013. To finance consturction of this plant, Greig borrowed $600,000 from the bank on December 1, 2012. Greig had no other borrowings. The $600,000 was a 10-year loan bearing interest at 8%.
Instructions:
Compute the balance in each of the following accounts at December 31, 2012, and December 31, 2013. (Round amounts to the nearest dollar).
a. Land
b. Buildings
c. Interest Expense