Question

Samtech Manufacturing purchased land and building for $4 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building: Title insurance Legal fees for drawing the contract Pro-rated property taxes for the period after acquisition State transfer fees $ 19,000 6,500 39,000 4,300 An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3.7 and $1.3 million, respectively. Shortly after acquisition, Samtech spent $85,000 to construct a parking lot and $43,000 for landscaping. Required: 1. Determine the initial valuation of each asset Samtech acquired in these transactions. 2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $280,000 and the salvaged materials were sold for $7,500. In addition, Samtech spent $82,000 clearing and grading the land in preparation for the construction of a new building. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the initial valuation of each asset Samtech acquired in these transactions. (Enter your answers in whole dollars.) Assets Initial Valuation

Answer 1

1) initial valuation
land			2982052
building			1047748
land improvements (85000+43000)			128000
Total cost of land & building
purchase cost -land & building			4000000
title insurance			19000
legal fees			6500
state tranfer fees			4300
Total cost			4029800
		appraised value	%of total appraised value	allocation
Land		3700000	74%	2982052
Building		1300000	26%	1047748
		5000000	100%	4029800
2)		land
initial cost		4029800
cost of demolishing		280000
salvage material sold		-7500
clearing & garding		82000
total		4384300
Assets		initial valuation
Land		4384300
Building		0
land improvement		128000