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ABLE CORPORATION PURCHASED LAND AS A FACTORY SITE

ABLE CORPORATION PURCHASED LAND AS A FACTORY SITE

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Author: Joyce Buda
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http://theperfecthomework.com/able-corporation-purchased-land-as-a-factory-site-and-contracted-with-ready-construction-to-construct-a-factory/

Able Corporation purchased land as a factory site and contracted with Ready Construction to construct a factory. Able made the following expenditures related to the acquisition of the land, building, and machinery to equip the factory:

 
 
Purchase price of the land                                                                                                                                                                                     1,400,000

 
 
Demolition and removal of old building

 
60,000

 
 
Clearing and grading the land before construction

 
145,000

 
 
Various closing costs in connection with acquiring the land

 
32,000

 
 
Architect's fee for the plans for the new building

 
70,000

 
 
Payments to LuLu for building construction

 
3,350,000

 
 
Machinery purchased

 
855,000

 
 
Freight charges on machinery

 
31,000

 
 
Trees, plants, and other landscaping

 
47,000

 
 
Installation of a sprinkler system for the landscaping

 
3,000

 
 
Cost to build special platforms and install wiring for the machinery

 
11,000

 
 
Cost of trial runs to ensure proper installation of the machinery

 
6,000

 
 
Fire and theft insurance on the factory for the first year of use

 
24,000

 
 
 
 
 
In addition to the above expenditures, Able purchased four forklifts from Fleet Street. In payment, Able paid $18,000 cash and signed an interest-bearing note requiring the payment of $50,000 at the end of one year. An interest rate of 8% properly reflects the time value of money for this type of loan.
 
Required:

 
Determine the acquisition costs of each of the assets Able acquired in the above transactions for land, building, machinery, land improvements, forklifts, and prepaid insurance. You must show the details of each category to receive credit.


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