Chapter 10, Problem 10.10E

Acquisition costs; noninterest-bearing note

• LO10–1, LO10–3

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.