Teradene Corporation purchased land as a factory site and contracted with Maxtor Construction to construct afactory. Teradene made the following expenditures related to the acquisition of the land, building, and equipmentfor the factory:Purchase price of the land $1,200,000Demolition and removal of old building 80,000Clearing and grading the land before construction 150,000Various closing costs in connection with acquiring the land 42,000Architect’s fee for the plans for the new building 50,000Payments to Maxtor for building construction 3,250,000Equipment purchased 860,000Freight charges on equipment 32,000Trees, plants, and other landscaping 45,000Installation of a sprinkler system for the landscaping 5,000Cost to build special platforms and install wiring for the equipment 12,000Cost of trial runs to ensure proper installation of the equipment 7,000Fire and theft insurance on the factory for the first year of use 24,000In addition to the above expenditures, Teradene purchased four forklifts from Caterpillar. In payment, Teradenepaid $16,000 cash and signed a noninterest-bearing note requiring the payment of $70,000 in one year. An interestrate of 7% properly reflects the time value of money for this type of loan.Required:Determine the initial valuation of each of the assets Teradene acquired in the above transactions
Teradene Corporation purchased land as a factory site and contracted with Maxtor Construction to construct a
factory. Teradene made the following expenditures related to the acquisition of the land, building, and equipment
for the factory:
Purchase price of the 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 the 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 the 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
In addition to the above expenditures, Teradene purchased four forklifts from Caterpillar. In payment, Teradene
paid $16,000 cash and signed a noninterest-bearing note requiring the payment of $70,000 in one year. An interest
rate of 7% properly reflects the time value of money for this type of loan.
Required:
Determine the initial valuation of each of the assets Teradene acquired in the above transactions
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