Question

1 Samtech Manufacturing purchased land and building for $3 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building: 1 Title insurance $30,000 7,000 50,000 5,400 points Legal fees for drawing the contract Pro-rated property taxes for the period after acquisition State transfer fees еВook An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3 and $1 million, respectively. Shortly after acquisition, Samtech spent $96,000 to construct a parking lot and $54,000 for landscaping. Hint Required: 1. Determine the initial valuation of each asset Samtech acquired in these transactions. 2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $390,000 and the salvaged materials were sold for $8,000. In addition, Samtech spent $93,000 clearing and grading the land in preparation for the construction Print a new building References Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $390,000 and the salvaged materials were sold for $8,000. In addition, Samtech spent $93,000 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 KRequired 1 Required 2

Answer 1

Calculation of initial valuation of each assets
Cost of land & building
Cost of land & building				3000000
title insurance				30000
legal fees				7000
state transfer fees				5400
Total cost				3042400
Assets	fair value	%of fair value	total cost*%of face value
land	3000000	75%	2281800
building	1000000	25%	760600
total	4000000		3042400
Initial valuation of assets
assets			total cost*%
Land			2281800
building			760600
Total cost			3042400
land improvements
land			96000
building			54000
Total cost			150000
2) calaculation of initial valuation of each assets after
acquisition
Particulars			amount	amount
purchase price				3000000
title insurance				30000
legal fees				7000
state transfer fees				5400
demolition costs			390000
less: salvage of material			-8000	382000
clearing & grading cost				93000
total costof land				3517400
Land improvement
parking lot				96000
landscaping				54000
total land improvement				150000

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