Exercise 10-3 Acquisition costs; lump-sum acquisition [LO10-1, LO10-2] Semtech M
ID: 2648515 • Letter: E
Question
Exercise 10-3 Acquisition costs; lump-sum acquisition [LO10-1, LO10-2]
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:
An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3.9 and $1.1 million, respectively. Shortly after acquisition, Semtech spent $87,000 to construct a parking lot and $45,000 for landscaping.
Determine the initial valuation of each asset Semtech acquired in these transactions. (Enter your answers in whole dollars.)
Determine the initial valuation of each asset, assuming that immediately after acquisition, Semtech demolished the building. Demolition costs were $300,000 and the salvaged materials were sold for $8,500. In addition, Semtech spent $84,000 clearing and grading the land in preparation for the construction of a new building. (Enter your answers in whole dollars.)
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:
Explanation / Answer
Solution-1
Value to be capitalized = $4,000,000+$21,000+$7,500+$4,500
Value to be capitalized =$4,033,000
Solution-2
Assets Fair Value Percentage of total Proportional value Land $3,900,000 78% $3,145,740 Building $1,100,000 22% $887,260 Total $5,000,000 $4,033,000Related Questions
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