Question
TebalNipis purchased land as a factory site and contracted with Maksum Construction to construct a factory. TebalNipis made the following expenditures related to the acquisition
TebalNipis purchased land as a factory site and contracted with Maksum Construction to construct a factory. TebalNipis made the following expenditures related to the acquisition of the land, building and machinery to equip the factory:
Purchase price of the land | RM1,200,000 |
Demolition and removal of old building | 80,000 |
Clearing and grading the land before construction | 150,000 |
Various closing costs in connection with acquiring the land | 42,000 |
Architects fee for the plans for the new building | 50,000 |
Payments to Maksum for building construction | 3,250,000 |
Machinery purchased | 860,000 |
Freight charges on machinery | 32,000 |
Trees, plants and other landscaping | 45,000 |
Installation of a sprinkler system for the landscaping | 5,000 |
Costs to build special platforms and install wiring for the machinery | 12,000 |
Cost of trial runs to ensure proper installation of the machinery | 7,000 |
Fire and theft insurance on the factory for the first year of use | 24,000 |
In addition to the above expenditures, TebalNipis purchased four forklifts from Choo & Co. In payment, TebalNipis paid RM16,000cash and signed a noninterest-bearing note requiring the payment of RM70,000 in one year. An interest rate of 7% properly reflects the time value of money for this type of loan.
Required:
Determine the initial valuation of each of the assets TebalNipis acquired in the above transactions.
(Note: Present value of RM1, n=1, i=7%, is 0.93458)
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