On January 6, 2019, Baxter Company purchased a site for a new manufacturing plant for $6,800,000. At a cost of $42,000, it razed an existing facility (fair market value $600,000) and received $28,000 from its salvage. The company also paid $14,800 in attorney fees, $4,700 in inspection fees, and $3,300 for a permit to raze the facility. After the facility was torn down, the following costs were incurred: $120,800 for fill dirt for the site, $84,000 for leveling the site, $270,000 for paving sidewalks and curbs, and $10,400,000 for building costs of the new facility. The parking area was paved at a cost of $271,400.

INSTRUCTIONS
Compute the capitalized costs of

(1) The manufacturing plant,

(2) The land,

(3) The land improvements.

Analyze: Unfortunately, Baxter’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 $700,000. The president suggests that the loss should be capitalized as part of the cost of the new building. What is your recommendation?