Question
Teradene Corporation purchased land as a factory site and contracted with Maxtor Construction to construct a factory. Teradene made the following expenditures related to the
Teradene Corporation purchased land as a factory site and contracted with Maxtor Construction to construct a factory. Teradene made the following expenditures related to the acquisition of the land, building, and machinery to equip the factory (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): |
Purchase price of the land | $ | 1,200,000 | |
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 | ||
Architect's fee for the plans for the new building | 50,000 | ||
Payments to Maxtor 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 | ||
Cost 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, Teradene purchased four forklifts from Caterpillar. In payment, Teradene paid $16,000 cash and signed a noninterest-bearing note requiring the payment of $70,000 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 Teradene acquired in the above transactions.
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