Semtech Manufacturing purchased land and building for $8 million. In addition to the purchase price, Semtech made the following expenditures in connection with the purchase of the land and building:
- Title insurance $ 22,000
- Legal fees for drawing the contract 8,000
- Pro-rated property taxes for the period after acquisition 42,000
- State transfer fees 4,600
An independent appraisal estimated the fair values of the land and building, if purchased separately, at $4 and $1 million, respectively. Shortly after acquisition, Semtech spent $88,000 to construct a parking lot and $46,000 for landscaping.
Required:
1.Determine the initial valuation of each asset Semtech acquired in these transactions. (Enter your answers in whole dollars.)
- Land
- Building
- Land Improvments
2.Determine the initial valuation of each asset, assuming that immediately after acquisition, Semtech demolished the building. Demolition costs were $310,000 and the salvaged materials were sold for $9,000. In addition, Semtech spent $85,000 clearing and grading the land in preparation for the construction of a new building. (Enter your answers in whole dollars.)
- Land
- Building
- Land Improvments