On January 1, 2017, ML Company acquired a parcel of real estate that included land and a building for a negotiated price of $2,290,000. Before purchasing the property, ML paid $30,000 for an appraisal that estimated the fair value of the land to be $756,000 and the building to be $1,944,000. In addition, LM incurred closing costs of $180,000 to complete the transfer of the property and the purchase was financed through a 20 year mortgage note payable with an interest rate of 4%.. Two days after completion of the transfer ML had a water leak in the building that caused $75,000 worth of damage to the building which was repaired. Required: Assuming ML occupies the building, determine the acquisition cost that would be capitalized to the land and building accounts.
On January 1, 2017, ML Company acquired a parcel of real estate that included land and a building for a
negotiated price of $2,290,000. Before purchasing the property, ML paid $30,000 for an appraisal that estimated the fair value of the land to be $756,000 and the building to be $1,944,000. In addition, LM incurred closing costs of $180,000 to complete the transfer of the property and the purchase was financed through a 20 year mortgage note payable with an interest rate of 4%.. Two days after completion of the transfer ML had a water leak in the building that caused $75,000 worth of damage to the building which was repaired.
Required: Assuming ML occupies the building, determine the acquisition cost that would be capitalized to the land and building accounts.
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