The executives for Paradise Island resorts bought a piece of property adjacent to the resort with an old medical facility to build a golf course on July 1, 2009. The land with the old medical facility was $1,750,000.
Real estate commissions and fees including the title search were $250,750. Paradise paid $45,500 for the medical facility to be demolished and an additional $21,000 for medical and hazard waste cleanup. The company paid $60,000 for vegetation and sand for the new area. Paradise paid $550,000 to an architectural landscaper and contractor to design and build the golf course.
Paradise hired two new employees at a salary of $40,000 a year each to maintain the landscaping for the new area.
1. What amount should be capitalized for this new asset?
2. Would there be any depreciation expense for land for the year ended June 30, 2010? Explain your answer.