The cost of land includes the original purchase price; brokers’ commissions; legal fees; title, recording, and escrow fees; surveying costs; local government special assessment taxes; co
Trang 1CHAPTER 12 QUESTIONS
1 a The cost of land includes the original
purchase price; brokers’ commissions;
legal fees; title, recording, and escrow
fees; surveying costs; local
government special assessment
taxes; cost of clearing or grading; and
other costs that permanently improve
the land or prepare it for use
Expenditures for land improvements
that have a limited life, such as
paving, fencing, and landscaping, may
be separately summarized as land
improvements and depreciated over
their estimated useful lives
b The cost of buildings includes the
original purchase price, brokers’
commissions, legal fees, title and
escrow fees, reconditioning costs,
alteration and improvement costs, and
any other costs that improve the
buildings and hence benefit future
periods
c The cost of equipment includes the
original purchase price, taxes and
duties on purchases, freight charges,
insurance while in transit, installation
charges and other costs in preparing
the asset for use, subsequent
improvements or additions, and any
other expenditures that will improve
the equipment and thus benefit more
than one period
2 a A copyright, when purchased, is
recorded at its purchase price When
internally developed, all costs of
legally establishing the copyright are
included as costs of the copyright
b The cost of purchasing a franchise
and all other sums paid specifically for
a franchise including legal fees are
considered the franchise cost
Property improvements required under
the franchise also are recorded as part
of the franchise cost
c The cost of a trademark includes all
expenditures required to establish the
trademark, such as filing and
trademark Purchased trademarks arerecorded at the purchase price
3 Accountants frequently are required to
allocate costs among two or moreaccounts The principal method ofallocation is based on relative marketvalues of the individual assets, if they can
be determined A ratio of each individualasset’s market value to the sum of themarket values for all assets involved in thepurchase is used to determine cost foreach individual asset If market values, orsome approximation of market values,cannot be obtained for all assets in thebasket purchase, allocation can be made
to those assets where market values areavailable, and any remaining balance can
be allocated, on some systematic basis, toremaining assets
4 When equipment is purchased on a
deferred payment contract, care must betaken to exclude the stated or implicitinterest from the purchase price Theasset should be recorded at its equivalentcash price Interest on the unpaid contractbalance should be recognized as interestexpense over the life of the contract
5 a Sales practice for some products
consistently inflates the list price that
is initially assigned Because mostbuyers are aware of this practice,considerable negotiations take placebetween buyers and sellers before amarket price is established Ifaccountants use the list price withoutcareful evaluation, values could beinflated
b The goal of accounting for the
acquisition of property and equipment
is to record the acquisition at theequivalent cash price or the closestapproximation to cash that can beobtained This is especially importantwhen trade-ins are involved
6 a In constructing a new building for its
own use, Gaylen Corp will charge thebuilding with all costs incurred in
Trang 2building costs in the form of direct
labor, direct materials, factory
overhead, and any other expenditures
that can be identified with the
construction of the asset
b When a company constructs its own
assets, there are two positions that
may be taken in assigning general
overhead to the cost of the asset: (1)
Overhead may be assigned to special
construction just as it is assigned to
normal activities on the grounds that
both activities benefit from the
overhead; this would mean that
construction would be charged with
the increase in overhead arising from
construction activities as well as a pro
rata share of the company’s fixed
overhead (2) Only the increase in
overhead may be charged to
construction on the grounds that
management decides to construct its
own assets after giving due
consideration to the differential or
additional costs involved An equitable
allocation of the fixed overhead
between regular operations and
construction affords no special favor
to construction activities; on the other
hand, a charge to construction for only
the increase in total overhead grants
no special concessions to regular
activities during the construction
period
7 Before interest charges are capitalized, a
construction project should be a discrete
project Interest should not be capitalized
for inventories manufactured or produced
on a repetitive basis, for assets that are
currently being used, or for assets that are
idle and not undergoing activities to
prepare them for use
8 a If the donation of the property by the
philanthropist is unconditional, the
president’s position cannot be
defended If the donation is not
recognized, both assets and income
statements Properties unconditionallytransferred should be recognized bydebits to asset accounts and a credit
to a revenue account in terms of thefair
Trang 3market values of the properties
acquired, and depreciation should be
recognized in using such properties
b If the donation of the property is
contingent upon certain conditions,
the
president’s position relative to the
nonrecognition of the asset is proper
until the time the conditions are met
Until the conditions are met, the fair
value
of the conditional gift, along with a
description of the conditions, should
be disclosed in the notes to the
financial statements
9 An asset retirement obligation is a legal
obligation a company has to restore the
site of a piece of property or equipment
when the asset is retired The estimated
fair value of the asset retirement
obligation is recognized as a liability and
is added to the cost of the asset when it is
acquired
10 Many companies establish a minimum
monetary amount for recording
expenditures as assets, even though the
item purchased meets the definition of an
asset The principal reasons for this are
materiality and the cost involved in
recording an asset and depreciating it
over its estimated life It is more expedient
to expense these smaller capital
expenditures immediately, thus avoiding
the recordkeeping associated with assets
11 a The cost of a depreciable asset
incorrectly recorded as an expense
will understate assets and owners’
equity for the current year and for
succeeding years, but by successively
decreasing amounts until the asset no
longer makes a contribution to
periodic revenue Net income will be
understated in the first year by the
excess of the expenditure over
depreciation for the current period; net
income in succeeding years will be
overstated by the amount of
depreciation charges applicable to the
asset that should be charged off as
expense
b An expense expenditure incorrectly
recorded as an addition to the cost of
for succeeding years, but bysuccessively decreasing amounts untilthe charge has been fully written off.Net income will be overstated for thefirst year by the difference between the
Trang 4recognized depreciation for the current
period and the amount of the
expenditure; net income for
succeeding years will be understated
by the depreciation chargesrecognized in such periods
12 Expenditure Classification
a Cost of installing machinery Asset
b Cost of unsuccessful litigation to protect patent Expense
c Extensive repairs as a result of fire Expense
d Cost of grading land Asset
e Insurance on machinery in transit Asset
f. Interest incurred during construction period Asset (if interest added to construction
cost)Expense (if interest charged toexpense)
g Cost of replacing a major machinery component Asset
h New safety guards on machinery Asset
i. Commission on purchase of real estate Asset
j. Special tax assessment for street improvements Asset
k Cost of repainting offices Expense
13 The remaining net book value of a
component that is replaced is added to
depreciation expense for the period
14 a Research activities are those used to
discover new knowledge that will be
useful in developing new products,
services, or processes, or significantly
improve an existing product or
process Development activities seek
to apply research findings to develop
a plan or design for new or improved
products and processes Development
activities include the formulation,
design, and testing of products,
construction of prototypes, and
operation of pilot plants
b Research and development costs are
generally expensed in the period
incurred An exception is when the
expenditure is for equipment and
facilities that have alternate future
uses beyond the specific current
research project This exception
permits the deferral of costs incurred
for materials, equipment, facilities,
and intangibles purchased, but only if
the alternative future use can be
specifically identified In addition,
15 With the full cost method of accounting for
oil and gas exploration costs, the cost of
drilling dry holes is capitalized and
amortized With the successful efforts method, only the exploratory costs
associated with successful wells arecapitalized; the cost of dry holes isexpensed as incurred
16 In general, the cost of internally generated
intangibles is expensed as incurred
17 The five general categories of intangible
assets are as follows:
18 The two approaches used in estimating
fair values using present value
computations are the traditional approach and the expected cash flow approach In
the traditional approach, which is oftenused in situations in which the amountand timing of the future cash flows isdetermined by contract, the present value
is computed using a risk-adjusted interest
Trang 5In the expected cash flow approach, a range
of possible outcomes is identified, the
present value of the cash flows in
each possible outcome is computed
(using the risk-free interest rate), and
a weighted-average present value is
computed by summing the present
value of the cash flows in each
outcome, multiplied by the estimated
probability of that outcome
19 a Goodwill may be reported properly as
an asset only when it is purchased or
otherwise established by a transaction
between independent parties
b Expenditures for advertising should
not be capitalized as goodwill Some
advertising expenditures may be
deferred if the costs applicable to
future benefits from such advertising
can be determined objectively
Normally, however, it is advisable to
expense such expenditures because
of the short-lived nature of the benefits
and because future benefits may be
difficult to estimate
20 Contract-based and separately tradable
intangibles are recognized in both a
basket purchase and in a business
combination Intangibles that are neither
of these, but that are still relevant and
reliably measurable, are recognized in a
basket purchase but are not separately
recognized when acquired as part of a
business combination
21 Recording noncurrent operating assets at
their current values represents a trade-off
between relevance and reliability In the
United States, reliability concerns have
resulted in the prohibition of asset
write-ups In many countries around the world,
accountants have learned to rely on the
judgment of professional appraisers whoestimate the current value of long-termassets
22 Under the provisions of IFRS 16, the credit
entry is to a revaluation equity accountwhen noncurrent operating assets arewritten up to reflect an increase in marketvalue (The important point is that therevaluation amount is not to be reported as
a gain in the income statement.)
23 The fixed asset turnover ratio is computed
as sales divided by average property, plant,and equipment (fixed assets); it isinterpreted as the number of dollars insales generated by each dollar of fixedassets
24 As with all ratios, the fixed asset turnover
ratio must be used carefully to ensure thaterroneous conclusions are not made Forexample, fixed asset turnover ratio valuesfor two companies in different industriescannot be meaningfully compared Anotherdifficulty in comparing values for the fixedasset turnover ratio among differentcompanies is that the reported amount forproperty, plant, and equipment can be apoor indicator of the actual fair value of thefixed assets being used by a company.Another complication with the fixed assetturnover ratio is caused by leasing Manycompanies lease the bulk of their fixedassets in such a way that the assets arenot included in the balance sheet Thispractice biases the fixed asset turnoverratio for these companies upward becausethe sales generated bythe leased assets are included in thenumerator of the ratio but the leased assetsgenerating the sales are not included in thedenominator
Trang 6PRACTICE EXERCISESPRACTICE 12–1 CATEGORIES OF TANGIBLE NONCURRENT OPERATING ASSETS
1 Land
Cost to purchase land $100,000Cost to purchase land 50,000Cost to prepare land for use 10,000
Cost to construct parking lot and sidewalks $10,000
PRACTICE 12–2 BASKET PURCHASE
Allocated Cost Equipment $120,000 (120,000/520,000) 500,000 $115,385
Building 300,000 (300,000/520,000) 500,000 288,461
Land 100,000 (100,000/520,000) 500,000 96,154
(Note: Some rounding is necessary to ensure that the total allocated cost is $500,000.)
PRACTICE 12–3 DEFERRED PAYMENT
Trang 8PRACTICE 12–8 CAPITALIZED INTEREST: MULTIPLE-YEAR COMPUTATION
Applicable Months ofInterest Avoidable Capitalized
Amount Rate Interest Interest From Year 1 $ 100,000 10% 12/12 $ 10,000
PRACTICE 12–10 ACCOUNTING FOR AN ASSET RETIREMENT OBLIGATION
PRACTICE 12–12 RESEARCH AND DEVELOPMENT
(1) Normal: Expense all$100,000 + $120,000 = $220,000
(2) Software: Expense amounts before technological feasibility: $100,000
(3) International: Expense amounts before technological feasibility: $100,000
Trang 9PRACTICE 12–16 INTANGIBLES AND A BASKET PURCHASE
500,000
Trang 10Cash 100,000 Inventory 50,000 R&D Expense 500,000 Goodwill (includes fair value of assembled workforce) 450,000 Liabilities
300,000
Cash
800,000
PRACTICE 12–18 FIXED ASSET TURNOVER RATIO
Fixed asset turnover ratio = Sales/Average net property, plant, and equipment
Fixed asset turnover ratio = Sales/Average net property, plant, and equipment
= $300,000/[($100,000 + $120,000)/2]
= 2.73Company A using market value of fixed assets
Fixed asset turnover ratio = Sales/Average net property, plant, and equipment
= $300,000/[($210,000 + $240,000)/2]
= 1.33Company A is more efficient (i.e., has a higher fixed asset turnover ratio) if one uses historical cost of fixedassets (2.73 compared to 1.43) However, Company B’s fixed assets are younger and are therefore reported atamounts close to their market values If we assume that the reported amounts of Company B’s fixed asset are afair approximation of their market values, then it appears that Company B is more efficient than is Company A(1.43 compared to 1.33)
Trang 1112–20 During the construction period, the expenditures will be charged as
follows:
Land Land Improvements Building
Purchase $390,000
Land survey 5,200
Fees for search of title for land 600
Building permit $ 3,500 Temporary quarters for construction
crews 10,750 Payment to tenants of old building for
vacating premises 4,600
Razing old building 47,000
Excavating basement 10,000 Special assessment tax for street
project 2,000
Costs of construction 2,900,000 Cost of paving parking lot adjoining
building $40,000
Cost of shrubs, trees, and other
landscaping 33,000 Total $ 449,400 $73,000 $2,924,250 Dividends, $5,000, should be closed to Retained Earnings Damages awarded for injuries sustained in construction, $8,400, are charged to a loss account.
Cash (or other credits) 66,200
*$25,000 lab expenses + $12,000 wages (40% of $30,000) = $37,000
†$8,000 metal + $3,200 blueprints + $18,000 wages (60% of $30,000) = $29,200
Patents 17,500 Cash 17,500
To record cost of defending patent.
Trang 1212–22 Cost
Cost Allocation Assigned to Appraised According to Individual Property Value Appraised Values Assets Land $ 250,000 (250,000/1,050,000) $920,000 = $ 219,048 Buildings 600,000 (600,000/1,050,000) $920,000 = 525,714 Equipment 200,000 (200,000/1,050,000) $920,000 = 175,238 Total $1,050,000 $ 920,000 12–23 Land [($400,000 ÷ 2/3) – $400,000] 200,000
June 30 Notes Payable 12,934
Cash 12,934 Interest Expense 6,900*
Discount on Notes Payable 6,900
*10% ($103,472 – $34,472) = $6,900 2007
June 30 Notes Payable 12,934
Cash 12,934 Interest Expense 6,297*
Discount on Notes Payable 6,297
*10% ($90,538 – $27,572)(rounded) = $6,297
Trang 1312–25 Value of the equipment considering interest at 9%
Discount on Notes Payable 30,808 Equipment 30,808 12–26 Trademarks 145,000
Land ($650,000 0.20) 130,000 Buildings 520,000 Franchise 115,000*
Common Stock 10,000 Paid-ln Capital in Excess of Par 900,000
*Market value of stock $910,000 Amount assigned on basis of known market
values:
Trademarks $145,000 Land 130,000 Buildings 520,000 795,000 Value assigned to franchise $115,000
12–27 Buildings 710,000
Premium on Bonds Payable ($300,000 0.06) 18,000 Bonds Payable 300,000 Common Stock 100,000 Paid-ln Capital in Excess of Par 292,000*
*$710,000 (cost of building) – $318,000 (market value of
bonds) = $392,000 (value assigned to common stock);
$392,000 – $100,000 (par value) = $292,000 paid-in capital
in excess of par.
Trang 1412–28 Land 885,000*
Common Stock (50,000 $0.50) 25,000 Paid-ln Capital in Excess of Par 725,000 Cash 135,000
*Market value of stock: 50,000 shares $15 $750,000 Cash paid:
Purchase price (partial) $80,000 Legal cost 10,000 Property tax—previous year 30,000 Building demolition $21,000
Less: Salvage 6,000 15,000 135,000 Total $ 885,000 12–29 Cost to construct special equipment:
*Interest charge: $1,045,000 10% 3/12 year = $26,125
Limited to amount of interest paid: $500,000 10% 6/12 = $25,000
Trang 1512–30 (1) Computation of the amount of interest to be capitalized for 2005 is as
follows:
Interest Fraction Capitalization of the Year Capitalized Expenditure Date Amount Rate Outstanding Interest January 2, 2005 $600,000 12.0%
12/12 $ 72,000
May 1, 2005 400,000 12.0 8/12 32,000
200,000 8.7* 8/12 11,600 November 1, 2005 500,000 8.7* 2/12 7,250 Total capitalized interest for 2005 $ 122,850
*Weighted-average interest rate on general bond liabilities:
Interest Bond Issue Principal Rate Cost
10-year $ 500,000 10.0%
$ 50,000
5-year 1,000,000 8.0 80,000
$1,500,000 8.7 $ 130,000 Weighted-average rate = $130,000 ÷ $1,500,000 = 8.7% (rounded)
(2) Computation of the amount of interest to be capitalized for 2006 is as follows:
Interest Fraction Capitalization of the Year Capitalized Expenditure Date Amount Rate Outstanding Interest Accumulated in 2005 $1,000,000 12.0%
12/12 $ 120,000
822,850 8.7 12/12 71,588 March 1, 2006 700,000 8.7 10/12 50,750 September 1, 2006 400,000 8.7 4/12 11,600 December 31, 2006 500,000 8.7 0/12 0 Total capitalized interest for 2006 $ 253,938 Interest capitalized in 2006 is restricted to the total interest incurred of $250,000 because this amount is less than the indicated amount to be capitalized of
$253,938.
12–31 (a) NC The construction does not cover an extended period of time.
(b) C.
(c) NC The equipment is produced on a repetitive basis.
(d) NC The construction costs are not substantial.
(e) NC The construction costs are not separately accumulated.
(f) NC The building is in use throughout the construction.
(g) NC The land is idle.
Trang 16Initial Acquisition
Detoxification Facility 900,000
Cash 900,000 Detoxification Facility 335,945
Asset Retirement Obligation 335,945
Accumulated Depreciation (old filters) 5,000 Depreciation Expense 10,000 Filters (old filters) 15,000 Cash 30,000
12–34 1 All $280,000 should be charged to research and development expenses.
Only expenditures for equipment that can be used on other projects can
be deferred No such alternative uses are identified in the problem.
2 Materials and equipment, exclusive of equipment useful
on other projects $ 40,000 Personnel 100,000 Indirect costs 50,000 Equipment depreciation ($90,000 ÷ 5)* 18,000 Total $208,000
*The equipment’s useful life on other projects would be the basis for the cost allocation to research and development expense for 2005.
Trang 1712–36 1 Successful efforts method:
Exploration expense $13 million Capitalized exploration cost $3 million
2 Full cost method:
Exploration expense 0 Capitalized exploration cost $16 million 12–37 (a) Record painting of partitions as an asset Original painting is considered
an asset expenditure Repainting is an expense.
(b) Normally record cost of tearing down the wall as a loss The old wall will not benefit future periods Some accountants justify capitalization because all incremental costs to construct extension should be considered cost of extension.
(c) Separate asset accounts should be maintained for the machine and the motor because they have substantially different useful lives When the old motor is replaced, any remaining book value should be added to depreciation expense for the year The cost of the new motor is recorded
in a separate asset account
(d) Record the cost of grading land as an asset It is a proper addition to land (e) Record the assessment for street paving as an asset It is a proper addition to land.
(f) Record cost of tearing down the previously occupied old building in preparation for a new one as an expense Expense relates to the old building, not to new construction As in (b), some accountants justify capitalization because cost of tearing down is necessary for new construction.
Trang 1812–38 1 Cash 5,000
Receivables 78,000 Inventory 136,000 Land, Buildings, and Equipment 436,000 Goodwill 295,000*
Current Liabilities 80,000 Long-Term Debt 120,000 Cash 750,000
*Balance of purchase price not allocated to identifiable assets.
2 Cash 5,000 Receivables 78,000 Inventory 136,000 Land, Buildings, and Equipment 366,000*
Current Liabilities 80,000 Long-Term Debt 120,000 Cash 385,000
*$70,000 reduction due to negative goodwill.
12–39 1 Accounts Receivable 220,000
Inventory 250,000 Prepaid Insurance 10,000 Buildings and Equipment (net) 200,000 Goodwill 110,000 Accounts Payable 160,000 Cash 630,000
2 Accounts Receivable 220,000 Inventory 250,000 Prepaid Insurance 10,000 Buildings and Equipment (net) 0 Extraordinary Gain 20,000 Accounts Payable 160,000 Cash 300,000
Trang 19Estimated Cost Allocation According to Cost Assigned to Fair Values Relative Estimated Values Individual Items Internet domain name $ 150,000 150,000/530,000 $500,000 $141,509 Order backlog 100,000 100,000/530,000 $500,000 94,340 In-process R&D 200,000 200,000/530,000 $500,000 188,679 Operating permit 80,000 80,000/530,000 $500,000 75,472
Trang 20$2,000,000/[($850,000 + $1,100,000)/2] = 2.05
Trang 21*Raw materials: $76,000 – $3,000 discount = $73,000
Machine tools balance $ 13,000
(a) Loss on Sale of Machinery 2,480*
Machinery (Job Order No 1329) 2,480
*Loss: $14,480 cost of dismantling old machine – $12,000 proceeds = $2,480 (b) Purchase Discounts 3,000
Machinery (Job Order No 1329) 3,000
To report cash discounts as a reduction in machine cost.
(c) Machinery (Job Order No 1329) 16,900
Factory Overhead 16,900
To report excess overhead as cost of machine.
(d) Profit on Construction of Machinery 24,000
Machinery (Job Order No 1329) 24,000
To cancel profit on self-construction; savings were improperly recognized as profit.
(e) Machine Tools 13,000
Machinery (Job Order No 1329) 13,000
To report machine tools separately.
12–44.
The solution to this problem is adapted from “Qs & As: Technical Hotline,” Journal of
Accountancy, February 1989, p 31.
(a) and (b) CN—Capitalize and don’t depreciate.
Costs of changing the land itself should be viewed as permanent improvements to the land and are not depreciable These costs include clearing away unwanted trees and shrubs, shaping the land for the tees and greens, building sand traps, and constructing artificial lakes.
Trang 2212–44 (Concluded)
(c) and (d) CD—Capitalize and depreciate.
If the lives of the plants can be reasonably estimated, the cost of the plants should be depreciated over those lives However, if no reasonable estimates exist, the cost should be capitalized but not depreciated.
(e) and (f) CD—Capitalize and depreciate.
Land improvements that wear out over time should be capitalized and depreciated.
(g) E—Expense.
The $50 cost of rakes is immaterial in relation to the other golf course expenditures The costs of estimating the life of the rakes and maintaining a rake account in the financial records would far exceed the value of the theoretical improvement in the records The best approach
is to expense the cost of the rakes.
(h) and (i) CN—Capitalize and don’t depreciate.
All costs of getting the land ready for its intended use should be included as part of the land cost.
12–45.
1 Cost of land:
Purchase price $ 120,000 Delinquent property taxes 35,000 Title search and insurance 6,500 City improvements 18,000 Cost of destroying buildings, net of salvage used in new building 17,000 Total cost of land $ 196,500 Cost of land improvements:
Landscaping $ 82,000 Sidewalks and parking lot 39,000 Total cost of land improvements $ 121,000
2 Cost of building:
Building permit $ 8,000 Salvage material from old building 3,000 Contract cost 1,650,000 Total cost of buildings $ 1,661,000 Fire insurance premium on building is charged to expense.
Trang 23*Alternatively, this could be debited to Prepaid Property Taxes and adjusted at June 30.
Machinery 25,000
Common Stock 3,000 Paid-ln Capital in Excess of Par 37,000 July 1 Franchise 20,000
Machinery 45,000
Discount on Bonds Payable 3,000
Cash 18,000 Bonds Payable 50,000 Nov 20 Land Improvements 54,600
Cash 54,600 Dec 31 Redecorating and Repairs Expense 7,500
Cash 7,500
Trang 24Organization Expenses 150,000*
Land, Buildings, and Equipment 150,000
To record costs identified with the establishment
of company These organization costs should be expensed as incurred.
*Organization fees paid to state $ 20,000
Corporate organization costs 30,000
Stock promotion bonus 100,000
$150,000 Land 353,400
Land, Buildings, and Equipment 353,400*
*Land site and old building $315,000
Title clearance fees 18,400
Cost of razing old building 20,000
$353,400 Miscellaneous Revenue 12,000
Land 12,000
To reduce the cost of the land by proceeds from the sale of scrap.
Executive Salaries Expense 60,000
Land, Buildings, and Equipment 60,000
To record executive salaries in expense account.
Patent 60,000
Land, Buildings, and Equipment 60,000
To reclassify patent cost to separate account.
Property Tax Expense 14,400
Land, Buildings, and Equipment 14,400
To reclassify county real estate tax.
Buildings 1,750,000
Land, Buildings, and Equipment 1,750,000
To reclassify building cost to separate account.
Trang 25To record the settlement costs and the additional legal fees in connection with the successful settlement of an infringement suit.
Trang 26(Note: As mentioned in the text, the AICPA has determined that
organization costs should be expensed as incurred.)
To record container license and trademark.
*600 $50 = $30,000 cost of both intangibles
Relative value, license to total cost: 2/3 $30,000 = $20,000
Trang 27Land Building Total Cost $90,000 (15%) $ 510,000 (85%) $600,000 Escrow fee 1,500 8,500 10,000 Property taxes 2,250 12,750 15,000 Real estate commission 4,500 25,500 30,000 Remodeling and repairs — 67,500 67,500
$98,250 $ 624,250 $ 722,500 (1)
*Discount on notes payable:
Discount on Notes Payable 15,578
Discount on Notes Payable 15,107
*$311,555 – $9,422 = $302,133; $302,133 0.05 = $15,107