On July 1, 2018, Ingalls Impending Disaster Inc. purchased land and a factory building at a total cost of $9,200,000. Prior to the purchase, the land and factory building were appraised at values of $500,000 and $9,500,000, respectively During July, Ingalls Impending Disaster Inc. began construction on a warehouse on the land adjacent to the factory building. The company completed the new warehouse in November 2018 and incurred the following costs related to its construction: Cost to remove debris from construction area Proceeds from scrap of debris material Cost to level and grade land in construction area Architect and design fees Construction materials and labor used Avoidable interest during construction period Actual interest during construction period $12,000 2,500 19,600 8,400 575,000 9,800 8,100 Ingalls Impending Disaster Inc. also incurred $36,750 of costs during 2018 to construct new sidewalks, parking lots and roadways on the property Determine the historic costs of the land, factory building, warehouse, and land improvements recognized by Ingalls Impending Disaster Inc. during 2018. (16 points) Your Answe Land Land Improvements Factory Building Warehouse SUPPORTING CALCULATIONS:
Historic Cost of each items are stated hereunder:
1) Land = $4,60,000 (Refer WN1)
2) Land Improvements = $19,600 ( Cost to level and grade land)
3) Factory Building =$87,40,000 (Refer WN3)
4) Warehouse= $ 6,37,750(Refer WN3)
Supporting Calculations:
WN1: Cost of Land
=$9,200,000 x $5,00,000/$100,00,000
=$ 4,60,000
WN2: Cost of Factory Building
= $9,200,000 x $95,00,000/$100,00,000
= $ 87,40,000
WN2: Cost of Warehouse
> Cost to remove debris - 12,000
> Architect and design fees - 8,400
> Actual Interest during construction period - 8,100
> New Sidewalks,parking lots and road ways - 36,750
> Construction material and labour - 5,75,000
Less: Proceeds from scrap - (2500)
Cost of Warehouse = $ 6,37,750
Note:Avoidable interest need not be taken in to account for computing cost.
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