Reference no: EM133004670

Question - On June 28, 2020, in relocating to a new town, Blue Spruce Corp. purchased a property consisting of two hectares of land and an unused building for $224,770 plus property taxes in arrears of $4,210. The company paid a real estate broker a fee of $11,870 for finding the property and legal fees on the purchase transaction of $5,750. The closing statement indicated that the assessed values for property tax purposes were $174,510 for the land and $34,550 for the building. Shortly after acquisition, the building was demolished at a cost of $23,590.

Blue Spruce Corp. then entered into a $1,300,200 fixed-price contract with Maliseet Builders Inc. on August 1, 2020, for the construction of an office building on this site. The building was completed and occupied on April 29, 2021, as was a separate maintenance building that was constructed by Blue Spruce's employees. Additional costs related to the property included:

Plans, specifications, and blueprints $25,200Architects' fees for design and supervision 82,400Landscaping 42,000Extras on contract for upgrading of windows 46,000External signage on the property 23,200Advertisements in newspaper and on television announcing opening of the building 10,200Gala opening party for customers, suppliers, and friends of Blue Spruce 18,400Costs of internal direct labour and materials for maintenance building 67,000Allocated variable plant overhead based on direct labour hours worked on maintenance building 9,600Allocated cost of executive time spent on project 53,600Interest costs on debt incurred to pay contractor's progress billings up to building completion 62,800Interest costs on short-term loan to finance maintenance building costs 3,000

As an incentive for Blue Spruce to locate and build in the town, the municipality agreed not to charge its normal building permit fees of $35,600. This amount was included in the $1,300,200 contract fee. Blue Spruce uses the cost reduction method for any government grants, such as the waiving of these permit fees. The contract amount of $1,300,200 was reduced by this grant. The building and the maintenance building are estimated to have a 40-year life from their dates of completion and will be depreciated using the straight-line method with no residual value.

Blue Spruce is a private company with an April 30 year end, and the company accountant is currently analyzing the new Buildings account that was set up to capture all the expenditures and credits explained above that relate to the property.

Compute costs that would be capitalized and included in the new Buildings account on the April 30, 2021 statement of financial position, assuming the accountant wants to comply with ASPE, but is aware that Blue Spruce needs to report increased income to support a requested increase in its bank loan next month assuming the fixed fee contract is reduced by municipal government grant amount.