Samtech Manufacturing purchased land and building for $4 million. In addition to the purchase price, Samtechmade the following expenditures in connection with the purchase of the land and building:Title insurance $16,000Legal fees for drawing the contract 5,000Pro-rated property taxes for the period after acquisition 36,000State transfer fees 4,000An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3.3and $1.1 million, respectively. Shortly after acquisition, Samtech spent $82,000 to construct a parking lot and$40,000 for landscaping.Required:1. Determine the initial valuation of each asset Samtech acquired in these transactions.2. Repeat requirement 1, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $250,000 and the salvaged materials were sold for $6,000. In addition, Samtech spent$86,000 clearing and grading the land in preparation for the construction of a new building.
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 $16,000
Legal fees for drawing the contract 5,000
Pro-rated property taxes for the period after acquisition 36,000
State transfer fees 4,000
An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3.3
and $1.1 million, respectively. Shortly after acquisition, Samtech spent $82,000 to construct a parking lot and
$40,000 for landscaping.
Required:
1. Determine the initial valuation of each asset Samtech acquired in these transactions.
2. Repeat requirement 1, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $250,000 and the salvaged materials were sold for $6,000. In addition, Samtech spent
$86,000 clearing and grading the land in preparation for the construction of a new building.
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