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	$	1,280,000
Demolition and removal of old building		88,000
Clearing and grading the land before construction		190,000
Various closing costs in connection with acquiring the land		50,000
Architect's fee for the plans for the new building		58,000
Payments to Maxtor for building construction		3,330,000
Equipment purchased		900,000
Freight charges on equipment		40,000
Trees, plants, and other landscaping		53,000
Installation of a sprinkler system for the landscaping		5,800
Cost to build special platforms and install wiring for the equipment		20,000
Cost of trial runs to ensure proper installation of the equipment		7,800
Fire and theft insurance on the factory for the first year of use		32,000

  
In addition to the above expenditures, Teradene purchased four forklifts from Caterpillar. In payment, Teradene paid $24,000 cash and signed a noninterest-bearing note requiring the payment of $78,000 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

Land
Purchase price of the land	1280000
Demolition and removal of old building	88000
Clearing and grading the land before construction	190000
Various closing costs in connection with acquiring the land	50000
Total cost of land	1608000
Building
Architect's fee for the plans for the new building	58000
Payments to Maxtor for building construction	3330000
Total cost of building	3388000
Machinery
Machinery purchased	900000
Freight charges on machinery	40000
Cost to build special platforms and install wiring for the machinery	20000
Cost of trial runs to ensure proper installation of the machinery	7800
Total cost of machinery	967800
Land Improvements
Trees, plants, and other landscaping	53000
Installation of a sprinkler system for the landscaping	5800
Total cost of Land improvrements	58800
Forklift
24000+(78000/1.09)	955560
as table not methioned if taken upto four decimal 1/1.09=.9174
In that case answer is 24000+(78000*.9174)	95557
Prepaid Insurance
Fire and theft insurance on the factory for the first year of use	32000