Samtech Manufacturing purchased land and building for $4 million. In addition to the purchase price, Samtech...

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Accounting

Samtech Manufacturing purchased land and building for $4million. In addition to the purchase price, Samtech made thefollowing expenditures in connection with the purchase of the landand building:
Title insurance $ 34,000
Legal fees for drawing the contract 9,000
Pro-rated property taxes for the period after acquisition 54,000
State transfer fees 5,800

An independent appraisal estimated the fair values of the land andbuilding, if purchased separately, at $3.5 and $1.5 million,respectively. Shortly after acquisition, Samtech spent $100,000 toconstruct a parking lot and $58,000 for landscaping.

Required:
1. Determine the initial valuation of each assetSamtech acquired in these transactions.
2. Determine the initial valuation of each asset,assuming that immediately after acquisition, Samtech demolished thebuilding. Demolition costs were $430,000 and the salvaged materialswere sold for $6,500. In addition, Samtech spent $97,000 clearingand grading the land in preparation for the construction of a newbuilding.

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3.9 Ratings (767 Votes)

Part 1 Cost of Land and Building Purchase Price 4000000 Title search and insurance 34000 Legal Fees 9000 State Transfer Fees 5800 Total Cost Land and See Answer

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Title insurance	$	34,000
Legal fees for drawing the contract		9,000
Pro-rated property taxes for the period after acquisition		54,000
State transfer fees		5,800