Reference no: EM132614922
Question - Golden State Warriors Ltd. is expanding its operations. Due to the expansion, they incurred the following costs during the fiscal period when they constructed a new factory:
Direct labour $650,000
Direct material for factory 675,000
Land 2,500,000
Staff training on new computer system 85,000
Imputed interest on lost opportunity costs 750,000
Loan interest to finance expansion 22,500
Architectural drawings 125,000
Testing and trial operations on the new factory 250,000
Purchase of company car for the new plant manager 48,000
Allocation of overhead based on labour hours worked on factory expansion 95,000
Instructions - Assuming Golden State Warriors have a policy to capitalize the interest on the project:
1. Which of these costs should be included in the capitalization of the new factory? Show and label all calculations
2. Provide journal entries of this acquisition. The entity paid $ 1,250,000 cash and assume a mortgage loan for the balance.
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