On January 6, 2019, Baxter Company purchased a site for a new manufacturing plan
ID: 2403677 • Letter: O
Question
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. 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.
Explanation / Answer
Baxter Company
Capitalized cost of manufacturing facility $4,700,000
Cost of land acquisition
$2,900,000
Add: cost of razing old building
$18,500
value of salvaged materials
($12,000)
permit to raze
$1,400
$7,900
Add: Attorney fee
$6,900
Insurance cost
$2,100
Cost of land
$2,916,900
Cost of land improvements
cost of filling the site
55,400
cost of leveling the site
$37,000
sidewalks and curbs
$130,000
cost of paving parking area
$130,700
cost of land improvements
$253,100
Cost of land acquisition
$2,900,000
Add: cost of razing old building
$18,500
value of salvaged materials
($12,000)
permit to raze
$1,400
$7,900
Add: Attorney fee
$6,900
Insurance cost
$2,100
Cost of land
$2,916,900
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