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 $ 1,230,000 Demolition and removal of old building 83,000 Clearing and grading the land before construction 165,000 Various closing costs in connection with acquiring the land 45,000 Architect's fee for the plans for the new building 53,000 Payments to Maxtor for building construction 3,280,000 Equipment purchased 875,000 Freight charges on equipment 35,000 Trees, plants, and other landscaping 48,000 Installation of a sprinkler system for the landscaping 5,300 Cost to build special platforms and install wiring for the equipment 15,000 Cost of trial runs to ensure proper installation of the equipment 7,300 Fire and theft insurance on the factory for the first year of use 27,000 In addition to the above expenditures, Teradene purchased four forklifts from Caterpillar. In payment, Teradene paid $19,000 cash and signed a noninterest-bearing note requiring the payment of $73,000 in one year. An interest rate of 8% 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.)

Answer 1

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Land:
Purchase price of the land		$      1,230,000
Demolition and removal of old building		$           83,000
Clearing and grading the land before construction		$         165,000
Various closing costs in connection with acquiring the land		$           45,000
		$      1,523,000
Building:
Architect's fee for the plans for the new building		$           53,000
Payments to Maxtor for building construction		$      3,280,000
		$      3,333,000
Equipment:
Equipment purchased		$         875,000
Freight charges on equipment		$           35,000
Cost to build special platforms and install wiring for the equipment		$           15,000
Cost of trial runs to ensure proper installation of the equipment		$             7,300
		$         932,300
Land Improvement:
Trees, plants, and other landscaping		$           48,000
Installation of a sprinkler system for the landscaping		$             5,300
		$           53,300
Prepaid Insurance:		$           27,000
Forklifts:
Cash		$           19,000
Add: PV of Note Payable	(73000*0.9259)	$           67,591
PV of 1 @ n=1, i=8%
		$           86,591