Early in its fiscal year ending December 31, 2021, San Antonio Outfitters finalized plans to expand operations. The first stage was completed on March 28 with the purchase of a tract of land on the outskirts of the city. The land and existing building were purchased by paying $380,000 immediately and signing a noninterest-bearing note requiring the company to pay $780,000 on March 28, 2023. An interest rate of 8% properly reflects the time value of money for this type of loan agreement. Title search, insurance, and other closing costs totaling $38,000 were paid at closing. At the end of April, the old building was demolished at a cost of $89,000, and an additional $69,000 was paid to clear and grade the land. Construction of a new building began on May 1 and was completed on October 29. Construction expenditures were as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
May 1 $ 4,050,000
July 30 2,450,000
September 1 2,040,000
October 1 2,940,000
San Antonio borrowed $6,500,000 at 8% on May 1 to help finance construction. This loan, plus interest, will be paid in 2022. The company also had a $7,150,000, 8% long-term note payable outstanding throughout 2021.
In November, the company purchased 10 identical pieces of equipment and office furniture and fixtures for a lump-sum price of $790,000. The fair values of the equipment and the furniture and fixtures were $623,000 and $267,000, respectively. In December, San Antonio paid a contractor $380,000 for the construction of parking lots and for landscaping.