Question

On January 6, 2019, Baxter Company purchased a site for a new manufacturing plant for $2,900,000. At a cost of $18,500, it razed an existing facility (fair market value $250,000) and received $12,000 from its salvage. The company also paid $6,900 in attorney fees, $2,100 in inspection fees, and $1,400 for a permit to raze the facility. After the facility was torn down, the following costs were incurred: $55,400 for fill dirt for the site, $37,000 for leveling the site, $130,000 for paving sidewalks and curbs, and $4,700,000 for building costs of the new facility. The parking area was paved at a cost of $130,700. Required: 1-3. Compute the capitalized cost of the manufacturing plant, land and land improvements. On January 6, 2019, Baxter Company purchased a site for a new manufacturing plant for $2,900,000. At a cost of $18,500, it razed an existing facility (fair market value $250,000) and received $12,000 from its salvage. The company also paid $6,900 in attorney fees, $2,100 in inspection fees, and $1,400 for a permit to raze the facility. After the facility was torn down, the following costs were incurred: $55,400 for fill dirt for the site, $37,000 for leveling the site, $130,000 for paving sidewalks and curbs, and $4,700,000 for building costs of the new facility. The parking area was paved at a cost of $130,700. Required: 1-3. Compute the capitalized cost of the manufacturing plant, land and land improvements.

Answer 1

Baxter Company

1. Computation of the capitalized cost of the manufacturing plant –

Capitalized cost of manufacturing facility     $4,700,000

1. Computation of the capitalized cost of the land –

Cost of land acquisition		$2,900,000
Add: cost of razing old building	$18,500
value of salvaged materials	($12,000)
permit to raze	$1,400	$7,900
Add: Attorney fee		$6,900
Insurance cost		$2,100
Cost of land		$2,916,900

1. Capitalized cost of land improvements –

Cost of land improvements
cost of filling the site	55,400
cost of leveling the site	$37,000
sidewalks and curbs	$130,000
cost of paving parking area	$130,700
cost of land improvements	$253,100