Problem: You are the project manager at Janson Manufacturing. Feedback from the annual employee's survey revealed that employees were interested in having a fitness center. Thus, last week, you closed the deal and purchased land and a building for $6 million. Other expenses incurred in connection to this purchase included:
Attorney fees for the contract = $10,000
Commissions = $55,000
Title insurance = $8,500
Pro-rated Property taxes = $75,000
An independent appraisal was requested to determine the individual fair value estimates. The land appraised at $5.5 million and the building at $1.9 million.
Spending on the property started right away. Janson installed fences and completed the driveway at a cost of $45,000 and $75,000, respectively.
Question 1: What is the initial valuation of each asset Janson purchased in these transactions?
Question 2: Suppose Janson, immediately after acquiring the property, decided to tear down the building. The cost of the removal of the building was $350,000 and salvaged materials sold for $8,000. An additional $100,000 was paid to grade the land for building the new fitness center. What is the initial valuation of each asset Janson acquired in this transaction?
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