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    Beldon & Oaktree: Amount to capitalize

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    1. On March 1, 2011, Beldon Corporation purchased land as a factory site for $60,000.00. An old building on the property was demolished, and construction began on a new building that was completed on December 15, 2011. 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, 2011) 3,000
    Construction costs 500,000
    Interest on construction loan 5,000
    Salvaged materials resulting from demolition of the old building were sold for $2,000.

    Determine the amounts that Beldon should capitalize as the cost of the land and the new building.

    2. Oak tree Company purchased a new machine and made the following expenditures:

    Purchase Price $45,000
    Sales tax 2,200
    Freight charges for shipment of machine 700
    Insurance on the machine for the first year 900
    Installation of machine 1,000

    The machine, including sales tax, was purchased on open account, with payment due in 30 days. The other expenditures listed above were paid in cash.

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    Solution Summary

    Your tutorial is attached in Excel. Click in cells to see computations. Rule for what is included in asset cost is given. I guessed that for Oaktree you needed the cost of the machine.