Falcon Waste Management Land and Building Acquisition
What expenditures did Falcon Waste Management make related to the acquisition of land and building?
- Broker's commission: $34,000
- Title insurance: $5,000
- Miscellaneous closing costs: $8,000
- Cost of demolishing the warehouse: $22,000
Amounts Falcon Waste Management Should Capitalize
Falcon Waste Management should capitalize the following costs as the cost of the land and the building:
- Purchase price of the land: $640,000
- Broker's commission: $34,000
- Title insurance: $5,000
- Miscellaneous closing costs: $8,000
When acquiring land and a building, it is important for Falcon Waste Management to properly capitalize certain expenditures. By capitalizing costs, Falcon can ensure that these expenses are added to the value of the asset rather than treated as immediate expenses.
Capitalizing costs related to the acquisition includes the purchase price of the land, broker's commission, title insurance, and miscellaneous closing costs. These costs are essential in determining the total capitalized cost for the land and building owned by Falcon Waste Management.
However, it's important to note that the cost of demolishing the warehouse should not be capitalized as it does not enhance the value of the land. By excluding this cost, Falcon can accurately determine the total capitalized cost for the land.
In conclusion, the total capitalized cost for the land owned by Falcon Waste Management should be $687,000. This total includes the initial purchase price, broker's commission, title insurance, and miscellaneous closing costs, but excludes the cost of demolishing the warehouse.