Question

Problem 18.1A Determining the cost to be capitalized for acquisition of assets. LO 18-1 On January 6, 2019, Baxter Company purchased a site for a new manufacturing plant for $1,500,000. At a cost of $11,500, it razed an existing facility (fair market value $110,000) and received $6,400 from its salvage. The company also paid $5,500 in attorney fees, $2,800 in inspection fees, and $2,100 for a permit to raze the facility. After the facility was torn down, the following costs were incurred: $41,400 for fill dirt for the site, $23,000 for leveling the site, $116,000 for paving sidewalks and curbs, and $3,300,000 for building costs of the new facility. The parking area was paved at a cost of $116,700. Required: 1-3. Compute the capitalized cost of the manufacturing plant, land and land improvements. Manufacturing ing Land Land Plant Improvements Construction of manufacturing plant Purchase of land Demolition of building Less salvage Attorney fees Inspection fees Permit to raze facility Purchase of fill dirt Leveling of site Paving of sidewalks and curbs Construction and paving of parking lot

Answer 1

Answer:

Baxter Company

1. Computation of the capitalized cost of the manufacturing plant –

Capitalized cost of manufacturing facility     $3,300,000

1. Computation of the capitalized cost of the land –

Cost of land acquisition		$1,500,000
Add: cost of razing old building	$11,500
value of salvaged materials	($6,400)
permit to raze	$2,100	$7,200
Add: Attorney fee	$5,500
Insurance cost	$2,800
Cost of land	$1,515,500

1. Capitalized cost of land improvements –

Cost of land improvements
cost of filling the site	41,400
cost of leveling the site	$23,000
sidewalks and curbs	$116,000
cost of paving parking area	$116,700
cost of land improvements	$297,100