Question

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: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):

Purchase price of the land	$	1,320,000
Demolition and removal of old building		92,000
Clearing and grading the land before construction		210,000
Various closing costs in connection with acquiring the land		54,000
Architect's fee for the plans for the new building		62,000
Payments to Maxtor for building construction		3,370,000
Equipment purchased		920,000
Freight charges on equipment		44,000
Trees, plants, and other landscaping		57,000
Installation of a sprinkler system for the landscaping		6,200
Cost to build special platforms and install wiring for the equipment		24,000
Cost of trial runs to ensure proper installation of the equipment		8,200
Fire and theft insurance on the factory for the first year of use		36,000

  
In addition to the above expenditures, Teradene purchased four forklifts from Caterpillar. In payment, Teradene paid $28,000 cash and signed a noninterest-bearing note requiring the payment of $82,000 in one year. An interest rate of 9% 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. (Round your answers to the nearest whole dollars.)

	Assets Initial valuation Land Building Equipment Land improvements Fork lifts Prepaid insurance

  

Answer 1

Asset	Intial Valuations
Land:
Purchase price	$1,320,000.00
Demolition and removal of old buildin	$92,000.00
Clearing and grading	$210,000.00
Various Closing costs in connection with acquiring of Land	$54,000.00
Total cost of the land	$1,676,000.00
Building:
Architect's fees	$62,000.00
Payment to Maxtor for Building Costruction	$3,370,000.00
Total cost of the building	$3,432,000.00
Equipment
Purchase Price	$920,000.00
Freight Charges	$44,000.00
Cost to Build Special platforms and wire installation	$24,000.00
Cost of trial runs to ensure Proper insstallation	$8,200.00
Total cost of Equipment	$996,200.00
Land improvements:
Tree , Plants and other Landscaping	$57,000.00
nstallation of Sprinkler system	$6,200.00
Total cost of Land Improvement	$63,200.00
Fork Lifts:
Cash Paid	$28,000.00
Non Interest bearing Note requiring the payment n One year	$82,000.00
Less: Interest component (82000*9/109)	$6,770.64
Total cost of ForkLift	$103,229.36
Prepaid insurance:	$36,000.00