Samtech Manufacturing puchased land building for $4 million. In addition to the

Question

Samtech Manufacturing puchased land building for $4 million. In addition to the purchase price, Samtech made made the following expenditures in connection with the purchase of the land and building: Title insurance $22000 legal fees for drawing the contract $8000 pro-rated taxes for the period after acquisition $42000 state transfer fees $4600. An independent appraisal estimated the fair values of the land and buiding if purchased separately at $1 and $4 million respectively. Shortly after acquisition, Samtech spent $88000 to construct a parking lot and $46000 for landscaping.

What is the initial valuation of the land?

What is the initial valuation of the building?

Explanation / Answer

Total cost of land and building Cost of land & Building 4000000 Title insurance 22000 legal fees 8000 pro rated taxes 42000 state transfer fees 4600 Total cost 4076600 Fair value % of fair value Land 1 million 20 Building 4 million 80 Total 5 million Initial valuation Total Cost 4076600 Land ( % of fair valuation) 20% 815320 Building ( % of fair valuation) 80% 3261280 Total 4076600 Land Improvements Parking lot 88000 landscaping 46000 134000

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