Teradene Corporation purchased land as a factory site and contracted with Maxtor

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 acquisition of the land, building, and equipment for 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.):

  
In addition to the above expenditures, Teradene purchased four forklifts from Caterpillar. In payment, Teradene paid $24,000 cash and signed a noninterest-bearing note requiring the payment of $78,000 in one year. An interest rate of 9% 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. (Round your answers to the nearest whole dollars.)

Purchase price of the land $ 1,280,000 Demolition and removal of old building 88,000 Clearing and grading the land before construction 190,000 Various closing costs in connection with acquiring the land 50,000 Architect's fee for the plans for the new building 58,000 Payments to Maxtor for building construction 3,330,000 Equipment purchased 900,000 Freight charges on equipment 40,000 Trees, plants, and other landscaping 53,000 Installation of a sprinkler system for the landscaping 5,800 Cost to build special platforms and install wiring for the equipment 20,000 Cost of trial runs to ensure proper installation of the equipment 7,800 Fire and theft insurance on the factory for the first year of use 32,000

Explanation / Answer

Answer

Land Purchase price of the land 1280000 Demolition and removal of old building 88000 Clearing and grading the land before construction 190000 Various closing costs in connection with acquiring the land 50000 Total cost of land 1608000 Building Architect's fee for the plans for the new building 58000 Payments to Maxtor for building construction 3330000 Total cost of building 3388000 Machinery Machinery purchased 900000 Freight charges on machinery 40000 Cost to build special platforms and install wiring for the machinery 20000 Cost of trial runs to ensure proper installation of the machinery 7800 Total cost of machinery 967800 Land Improvements Trees, plants, and other landscaping 53000 Installation of a sprinkler system for the landscaping 5800 Total cost of Land improvrements 58800 Forklift 24000+(78000/1.09) 955560 as table not methioned if taken upto four decimal 1/1.09=.9174 In that case answer is 24000+(78000*.9174) 95557 Prepaid Insurance Fire and theft insurance on the factory for the first year of use 32000

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