Answer:
1)
total price $4,000,000
if purchased separately, land was worth $3,500,000 and building $1,500,000.
cost of land:
70% x $4,000,000 purchase cost = $2,800,000
70% x $34,000 title insurance = $23,800
70% x $9,000 legal fees = $6,300
70% x $5,800 state transfer fees = $4,060
total cost of land = $2,834,160
cost of building:
30% x $4,000,000 purchase cost = $1,200,000
30% x $34,000 title insurance = $10,200
30% x $9,000 legal fees = $2,700
30% x $5,800 state transfer fees = $1,740
total cost of land = $1,214,640
Property taxes for the period after acquisition are expenses and cannot be capitalized. Landscaping and parking lots are reported separately because they have different useful lives than the building.
2)
cost of land:
$4,000,000 purchase cost
$34,000 title insurance
$9,000 legal fees
$5,800 state transfer fees
$430,000 demolition costs
- $6,500 sale of salvaged value
$97,000 land grading
total cost of land = $4,569,300
cost of building = $0
Property taxes for the period after acquisition are expenses and cannot be capitalized. Landscaping and parking lots are reported separately because they have different useful lives than the building.
