Mike’s Lemonade Stand (AILS) purchased a parcel of land for 510,000,000 on March 31. The site was available at a reasonable price. The company has a strategic plan to build a large warehouse in the area sometime in the next five years. The real estate agent representing MLS was paid $50,000. Title search and legal fees were $40,000.
MLS paid a fee to have the site rezoned for use as a warehouse rather than for residential use: $100,000. The company paid the seller $30,000 for the unexpired portion of property' tax on the site. This property' tax expires on June 30th. Property' tax for the last half of the year was $70,000. A number of abandoned homes on the site were demolished for $90,000. In the process of demolition, MLS received $15,000 for items salvaged from the homes.
As the site will remain vacant for a few years, MLS spent $200,000 landscaping it and putting in a sports field. MLS did this as part of a deal with the local residents so they would support the rezoning application. MLS spent $10,000 on food and entertainment to host a groundbreaking ceremony for the park opening. Senior managers and the president visited the party' and were paid $5,000 in salaries while there. The company further spent $35,000 to advertise their good corporate citizenship using the example of the park and ceremony. During the remaining part of the year $20,000 was spent to maintain the field. AILS erected fences for $55,000 around part of the site to prevent children from harming themselves.
AILS spent $25,000 on consulting fees to determine where the most appropriate site for the warehouse should be. Numerous sites were identified, including the one purchased.
Required:
Identify' whether and where AILS should capitalize each of the above expenditures. Briefly justify each of your responses.