Question

samtech manufacturing purchased land and a building for $4 million. in addition to the purchase price, samtech made the following expenditures in connection with the purchase of the land and building: title insurance$ 31,000legal fees for drawing the contract 7,500 prorated property taxes for the period after acquisition 51,000state transfer fees5,500an independent appraisal estimated the fair values of the land and building, if purchased separately, at $3.5 and $1.5 million, respectively. shortly after acquisition, samtech spent $97,000 to construct a parking lot and $55,000 for landscaping. required: determine the initial valuation of each asset samtech acquired in these transactions. determine the initial valuation of each asset, assuming that immediately after acquisition, samtech demolished the building. demolition costs were $400,000 and the salvaged materials were sold for $8,500. in addition, samtech spent $94,000 clearing and grading the land in preparation for the construction of a new building.

Answer 1

The initial valuation of the land is $3.5 million and the initial valuation of the building is $1.5 million. If we assume the building is demolished, its initial valuation would be $0. The initial valuation of the land, after clearing and grading, remains $3.5 million.

Step-by-step explanation:

To determine the initial valuation of each asset acquired by Samtech Manufacturing, we need to consider the purchase price, additional expenditures, and the fair values estimated by the independent appraisal.

• Land: The initial valuation of the land is $3.5 million, which is its estimated fair value.
• Building: The initial valuation of the building is $1.5 million, which is its estimated fair value.

If we assume that the building is demolished, we also need to consider the demolition costs and salvaged materials:

• Building (after demolition): The initial valuation of the building, after demolition, would be $0 since it no longer exists.
• Salvaged Materials: The salvaged materials were sold for $8,500, which can be considered as a reduction in the demolition costs.

Additionally, we need to consider the costs of clearing and grading the land:

• Land (after clearing and grading): The initial valuation of the land, after clearing and grading, remains $3.5 million.