Acquisition costs; lump-sum acquisition

Semtech Manufacturing purchased land and building for $4 million. In addition to the purchase price, Semtech made the following expenditures in connection with the purchase of the land and building:

Title insurance	$	31,000
Legal fees for drawing the contract		7,500
Pro-rated property taxes for the period after acquisition		51,000
State transfer fees		5,500

An 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, Semtech spent $97,000 to construct a parking lot and $55,000 for landscaping.

Determine the initial valuation of each asset Semtech acquired in these transactions.

Assets	Initial Valuation
Land
Building
Land improvements

Determine the initial valuation of each asset, assuming that immediately after acquisition, Semtech demolished the building. Demolition costs were $400,000 and the salvaged materials were sold for $8,500. In addition, Semtech spent $94,000 clearing and grading the land in preparation for the construction of a new building.

Assets	Initial Valuation
Land
Building
Land improvements

2.

Acquisition cost; acquisition by donation

In October 2017, the company received a $5 million of equipment that will be used to improve the roads in the local area.

Prepare the entry to record the donation of equipment.

Date	General journal	Debit	Credit