Samtech Manufacturing purchased land and building for $3 million. In addition to

Question

Samtech Manufacturing purchased land and building for $3 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building: An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3.6 and $1.2 million, respectively. Shortly after acquisition. Samtech spent $101,000 to construct a parking lot and $59,000 for landscaping. Determine the initial valuation of each asset Samtech acquired in these transactions. (Enter your answers in whole dollars.) Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $440,000 and the salvaged materials were sold for $7,000. In addition. Samtech spent $98,000 clearing and grading the land in preparation for the construction of a new building.

Explanation / Answer

Cost of Land and Building

Initial Cost $300,000

Tile Insurance $ 35000

Legal Fees $ 9500

Property taxes $ 0

State Transfer Fees $ 5900

Total Cost $30,50,400

Note: Pro rated property taxes for the period after acquision is not considred in Initial cost.

The Total is allocated based on Fair value of Land and Building

Initial Valuation

(%*$30,50,400

Land Improvement

2 Cost of Land will be as follows

  

Total cost of Land = $35,81,400

Total Cost of Buildign=$0

Land Improvement =$160,000

Asset Fair Value % of Total Fair Value

Initial Valuation

(%*$30,50,400

Land 36,00,000 75% $22,87,800 Buiding 12,00,000 25% $762600 $48,00,000 $30,50,400

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