Teradene Corporation purchased land as a factory site and contracted with Maxtor Construction to construct a factory. Teradene made the following expenditures related to the acquisition of the land, building, and equipment for the factory: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):

Purchase price of the land $1,370,000
Demolition and removal of old building 97,000
Clearing and grading the land before construction 235,000
Various closing costs in connection with acquiring the land 59,000
Architect's fee for the plans for the new building 67,000
Payments to Maxtor for building construction 3,420,000
Equipment purchased 945,000
Freight charges on equipment 49,000
Trees, plants, and other landscaping 62,000
Installation of a sprinkler system for the landscaping 6,700
Cost to build special platforms and install wiring for the equipment 29,000
Cost of trial runs to ensure proper installation of the equipment 8,700
Fire and theft insurance on the factory for the first year of use 41,000
In addition to the above expenditures, Teradene purchased four forklifts from Caterpillar. In payment, Teradene paid $33,000 cash and signed a noninterest-bearing note requiring the payment of $87,000 in one year. An interest rate of 6% properly reflects the time value of money for this type of loan.

1. Determine the initial valuation of each of the assets Teradene acquired in the above transactions.

= Purchase price of the land + Demolition and removal of old building + Clearing and grading the land before construction + Various closing costs in connection with acquiring the land

= $1,370,000 + $97,000 + $235,000 + $59,000

= $1,761,000

For Building

= Architect's fee for the plans for the new building + Payments to Maxtor for building construction

= $67,000 + $3,420,000

= $3,487,000

For equipment

= Equipment purchased + Freight charges on equipment + Cost to build special platforms and install wiring for the equipment + Cost of trial runs to ensure proper installation of the equipment

= $945,000 + $49,000 + $29,000 + $8,700

= $1,031,700

For land improvements

= Trees, plants, and other landscaping + Installation of a sprinkler system for the landscaping

= $62,000 + $6,700

= $68,700

For forklifts

= Cash + present value of non-interest-bearing note

= $33,000 + $87,000 × (1 ÷ 1.06)

= $33,000 + $87,000 × 0.94340

= $33,000 + $82,076

= $115,076