On January 6 2019 Baxter Company purchased a site for a new

On January 6, 2019, Baxter Company purchased a site for a new manufacturing plant for $2,900,000. At a cost of $18,500, it razed an existing facility (fair market value $250,000) and received $12,000 from its salvage. The company also paid $6,900 in attorney fees, $2,100 in inspection fees, and $1,400 for a permit to raze the facility. After the facility was torn down, the following costs were incurred: $55,400 for fill dirt for the site, $37,000 for leveling the site, $130,000 for paving sidewalks and curbs, and $4,700,000 for building costs of the new facility. The parking area was paved at a cost of $130,700. Required: 1-3. Compute the capitalized cost of the manufacturing plant, land and land improvements.

Solution

Cost of Land: Cost of old plant 2900000 Add: Demolition of existing plant 18500 Less: Salvage value of Plant 12000 Add: Attorney fees 6900 Add: Inspection fees 2100 Add: Permit fees to raze 1400 Add: Cost of filling land 55400 Add: Cost of Levelling 37000 Total cost of Land 3,033,300 Cost of Building plant: 4,700,000 Cost of Land Improvements: Cost of paving sidewalks 130000 Cost of Parking area 130700 Cost of Land Improvements: 260700