Pollachek Co. purchased land as a factory site for $450,000. The
process of tearing down two old buildings on the site and constructing
the factory required 6 months. The company paid $51,000 to tear down the
old buildings and sold salvaged lumber and brick for $10,300. Legal
fees of $3,750 were paid for title investigation and drawing the
purchase contract. Pollachek paid $2,200 to an engineering firm for a
land survey, and $65,000 for drawing the factory plans. The land survey
had to be made before definitive plans could be drawn. Title insurance
on the property cost $1,500, and a liability insurance premium paid
during construction was $1,900. The contractor’s charge for construction
was $2,740,000. The company paid the contractor in two installments:
$1,200,000 at the end of 3 months and $1,540,000 upon completion.
Interest costs of $170,000 were incurred to finance the construction.
Determine the cost of the land and the cost of the building as they
should be recorded on the books of Pollachek Co. Assume that the land
survey was for the building