fullerton waste mang purchased land and a warehouse for 600,000 in addition to t
ID: 2478678 • Letter: F
Question
fullerton waste mang purchased land and a warehouse for 600,000 in addition to the purchase price, fullerton made the following expenditureds related to the aqcusituin: brokers comission, 30,000; title insurance 3,000 misc closing costs 6,000 the warehouse immediatly demolished at a cost of 18,000 in anticiaption of the building of a new warehous.
assume that fullertton decides to use the house rather than demolish it an independent apraisal estimatates the fair values of the land and the warehouse at 420,000 and 280,000 respectvaly. determine the amounts fullerton should capitalize as the cost of the land and the building.
Explanation / Answer
Cost of land and building: Particulars Amount in $ Purchase price 600000 Broker’s commission 30000 Title insurance 3000 Miscellaneous closing costs 6000 Total cost 639000 Asset Market Value in $ % of total market value Initial valuation to be capitalized in $( percent * $639000) Land 420000 60% 383400 Building 280000 40% 255600 Total 700000 100% 639000
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