Calculate the cost of the initial recognition of warehouse

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Reference no: EM133006348

Question - Franks Logistics Ltd is constructing a new warehouse facility in western Sydney near the proposed second airport and adjacent to the M7 freeway. The purchase of the land occurred and warehouse construction commenced on 1 July 2016. It was ready for use on 31 May 2017, and operations commenced on 30 June 2017. Franks incurs a many costs in building the warehouse and it needs to determine those that should be recognised in the cost of the warehouse on initial recognition. These costs include:

Purchase cost of land

$10,000,000

Legal fees on acquisition

$50,000

Stamp duty

$750,000

Auction fees paid by the vendor

$40,000

Demolition of existing structure

$500,000

Bribe paid to local council official for recommending rezoning

$25,000

Cost of CEO salary for time taken to find site

$60,000

Contract payments for the construction of the warehouse (fixed price)

$20,000,000

Contract payments for construction of the warehouse (variations)

$2,000,000

Fines paid for Workcover (OH&S) breaches on the site

$37,500

Interest on $10m loan to purchase the land

$1,200,000

Landscaping of area surrounding warehouse

$90,000

Replanting of trees (landscaping) damaged by street races

$10,000

Purchase of e-tags for trucks

$100,000

Local Government / Council rates for the year

$60,000

Required - Calculate the cost of the initial recognition of the warehouse. Do not distinguish land and building and ensure to show all working where required.

Reference no: EM133006348

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