Maurice Tutor
$15/per page/Negotiable
15.  Cost of self-constructed assets. Bolton Company purchased a plot of land for $90,000  as a factory site. A small office building sits on the plot, conservatively appraised at $20,000. The company plans to use the office building after making some modifications and renova- tions (item (4) below). The company had plans drawn for a factory and received bids for its construction. It rejected all bids and decided to construct the factory itself. Management believes that plant asset accounts should include the following additional items:
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(1) |
Materials and Supplies for Factory Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$200,000 |
|
(2) |
Excavation of Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
12,000 |
|
(3) |
Labor on Construction of Factory Building. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
140,000 |
|
(4) |
Cost of Remodeling Old Building into Office Building . . . . . . . . . . . . . . . . . . . . . . . . . . . |
13,000 |
|
(5) |
Interest Paid on Cash Borrowed by Bolton to Construct Factorya . . . . . . . . . . . . . . . . . . . Â . |
6,000 |
|
(6) |
Interest Foregone on Bolton’s Own Cash Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
9,000 |
|
(7) |
Cash Discounts on Materials Purchased for Factory Building. . . . . . . . . . . . . . . . . . . . . . . |
7,000 |
|
(8) |
Supervision by Management on Factory Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
10,000 |
|
(9) |
Workers’ Compensation Insurance Premiums on Labor in (3) . . . . . . . . . . . . . . . . . . . . .  . |
8,000 |
|
(10) |
Payment of Claims for Injuries During Construction of Factory Building Not Covered by Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Â . |
 3,000 |
|
(11) |
Clerical and Other Expenses on Construction of Factory Building. . . . . . . . . . . . . . . . . . . Â . |
8,000 |
|
(12) |
Paving of Streets and Sidewalks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
5,000 |
|
(13) |
Architect’s Plans and Specifications of Factory Building . . . . . . . . . . . . . . . . . . . . . . . . . |
4,000 |
|
(14) |
Legal Costs of Conveying Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
2,000 |
|
(15) |
Legal Costs of Injury Claim During Construction of Factory Building . . . . . . . . . . . . . . . .  . |
1,000 |
|
(16) |
Income Credited to Retained Earnings Account (the difference between the foregone cost and the lowest contractor’s bid) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
 11,000 |
aThis interest is the entire amount of interest paid during the construction period.
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Show in detail the items Bolton should include in the following accounts: Land, Factory Building, Office Building, and Site Improvements. Explain the reason for excluding any of these items from the four accounts.