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 $ 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 and building, if purchased separately, at $3.5 and $1.5 million, respectively. Shortly after acquisition, Samtech spent $100,000 to construct a parking lot and $58,000 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 $430,000 and the salvaged materials were sold for $6,500. In addition, Samtech spent $97,000 clearing and grading the land in preparation for the construction of a new building.

Answer 1

Requirement 1.1. Initial valuation fair value Asset land 707 307 2450000 450000 3500 000 1500 000 5000000 building 1007 Assets 2450000 land 450000 Building Jond improvements parking lot > 100000 landscaping → 58000 Requirement 4000000 34000 I cast of land 9000 5800 purchase price title insurance legal feeds State transfer fees (430000-6500) Demolition costs 4 23500 97000 4569300 clearing costs Total cost land improvements: 100000 58000 parking 107 land Scaping > →