On July 5, 2016, the Hilltop Company purchased a site for its new headquarters for $425,000. At a cost of $40,000, it razed two existing houses, with a total appraised value of $95,000, and received $23,000 from salvage. The firm also paid $12,000 in attorney's fees, $2,000 in inspection fees, and $700 for a permit to raze the houses. After the houses were razed, the firm incurred these costs:
$40,000 for fill dirt for the site
$30,000 for leveling the site
$80,000 for paving sidewalks and curbs
$105,500 for paving a parking lot
$3,975,000 for construction costs of new building
INSTRUCTIONS
Compute the capitalized costs of
(1) The land,
(2) The building, and
(3) The land improvements.
Analyze: What net effect did these transactions have on the total owner's equity?