(Interest During Construction) Grieg 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 surveying costs and $4,000 for a 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 formalized 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 construction of this plant, Grieg borrowed $600,000 from the bank on December 1, 2012. Grieg 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.
(a) Land.
(b) Buildings.
(c) Interest Expense.