Question

The Nameless Cove Hotel (Nameless Cove) is a luxury resort in Atlantic Canada. Recently, Nameless Cove built a new, Olympic-size swimming pool on its grounds. The pool was constructed by Deep and Sure Pool Company (Deep and Sure). The following costs were incurred to build the pool:
i. Building permits..................... $ 1,000
ii. Design costs ...................... 8,000
iii. Redesign costs required to make changes
that Nameless Cove wanted after construction began....... 5,000
iv. Cost of clearing the land of trees and bushes........... 12,000
v. Amount paid to Deep and Sure for construction of the pool.... 150,000
vi. Damage and repairs to an adjacent property caused
when heavy equipment was brought onto the site to do the excavation... 22,000
vii. Cost of meals served to workers............... 2,000
viii. Penalties paid to Deep and Sure because Nameless Cove did
not want construction to be done on certain regular working days.... 9,000
ix. Damage and repair of underground telephone lines that
Nameless Cove neglected to advise Deep and Sure about....... 5,500
x. Construction of a patio.................... 45,000
xi. Electrical wiring installed for pool equipment
and lighting around the patio................ 15,000
xii. Cost of new plants for the patio................ 9,200

Required:
Determine the amount that should be capitalized as part of the cost of the pool. Explain your reasoning for including or excluding each item in the capitalized cost.



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  • CreatedFebruary 26, 2015
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