On January 6, 20X1, Turner Company purchased a site for a new manufacturing plant for $7,200,000. At

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On January 6, 20X1, Turner Company purchased a site for a new manufacturing plant for $7,200,000. At a cost of $45,880, it razed an existing facility (fair market value $600,000) and received $32,000 from its salvage. The company also paid $15,200 in attorney fees, $5,250 in inspection fees, and $3,675 for a permit to raze the facility. After the facility was torn down, the following costs were incurred: $139,300 for fill dirt for the site, $86,000 for leveling the site, $291,000 for paving sidewalks and curbs, and $12,560,000 for building costs of the new facility. The parking area was paved at a cost of $285,900.


INSTRUCTIONS
Compute the capitalized costs of (1) the manufacturing plant, (2) the land, and (3) the land improvements.
Analyze: Unfortunately, Turner’s new building was not completed on schedule, but the company had to vacate the old building. As a result, the business was shut down for two months. During this period, the company reported a net loss of $690,000. The president suggests that the loss should be capitalized as part of the cost of the new building. What is your recommendation?

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College Accounting Chapters 1-30

ISBN: 9781260247909

16th Edition

Authors: David Haddock, John Price, Michael Farina

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