Question

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	$	26,000
Legal fees for drawing the contract		5,000
Pro-rated property taxes for the period after acquisition		46,000
State transfer fees		5,000

An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3.2 and $1.8 million, respectively. Shortly after acquisition, Samtech spent $92,000 to construct a parking lot and $50,000 for landscaping.

Required:
2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $350,000 and the salvaged materials were sold for $6,000. In addition, Samtech spent $89,000 clearing and grading the land in preparation for the construction of a new building.

Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $350,000 and the salvaged materials were sold for $6,000. In addition, Samtech spent $89,000 clearing and grading the land in preparation for the construction of a new building. (Enter your answers in whole dollars.)

Assets	Initial Valuation
Land
Building
Land improvements

Answer 1

ans 2
Total cost
Purchase price	$4,000,000
Title insurance	26,000
Legal fees for drawing the contract	5,000
State transfer fees	5,000
Demolition cost	350,000
Less: salvage value	-6,000
Clearing and grading of land	89,000
Total cost	$4,469,000
pro rated propety taxes are not part of acquisition
Total cost is cost of land as building is demolished)	$4,469,000
land improvement=Parking lot+landscaping (92000+50000)	142000
building (as this is demolished hence $0)	$0
answer
Assets	Initial Valuation
Land	$4,469,000
Building	$0
Land improvements	142000
If any doubt please comment