Determine the initial valuation of each of the assets Teradene acquired in the above transactions. i) Land ii) Factory building iii) Equipment
Teradene Corporation purchased land as a factory site and contracted with
Maxtor Construction to construct a factory. Teradene mad the following
expenditures related to the acquisition of the land, building, and equipment
for the factory.
GHC
Purchase price of land 1,200,000
Demolition and removal of old building 80,000
Clearing and grading the land before construction 150,000
Various closing costs in connection with acquiring land 42,000
Architect’s fee for the plans for the new building 50,000
Payments to Maxtor for building construction 3,250,000
Equipment purchased 860,000
Freight charges on equipment 32,000
Trees, plants and other landscaping 45,000
Installation of a sprinkler system for landscaping 5,000
Cost to build special platforms and install wiring for the equipment 12,000
Cost of trial runs to ensure proper installation of the equipment 7,000
Fire and theft insurance on the factory for the first year of use 24,000
Required:
Determine the initial valuation of each of the assets Teradene acquired in the above
transactions.
i) Land
ii) Factory building
iii) Equipment
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