Samtech Manufacturing purchased land and building for $4 million. In addition to

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:

4600

An independent appraisal estimated the fair values of the land and building, if purchased separately, at $4 and $1 million, respectively. Shortly after acquisition, Samtech spent $88,000 to construct a parking lot and $46,000 for landscaping. Samtech demolished the building. Demolition costs were $310,000 and the salvaged materials were sold for $9,000. In addition, Samtech spent $85,000 clearing and grading the land in preparation for the construction of a new building.

What is the initial valuation of the land?

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:

Explanation / Answer

The Initial valuation of land includes all cost incurred in preparing the land for its intended purpose. That includes

Procurement price = $4 million

+ title insurance = $22000

+ legal fees = $8000

+ state transfer fees = $4600

+ demolition cost less salvage of material= $301000

+ clearing & grading cost= $85000

Total Land cost = $4,420,600

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