Falcon Waste Management: Acquisition and Capitalization

What were the expenditures made by Falcon Waste Management in relation to the acquisition of land and a warehouse? What amounts should be capitalized as the cost of the land and building? Falcon Waste Management made several expenditures related to the acquisition, including broker's commission of $36,000, title insurance of $6,000, miscellaneous closing costs of $9,000, and demolition costs of $24,000. The total amount capitalized for the cost of the land is $735,000, which includes all acquisition and preparation costs. However, no building costs will be capitalized until the construction of the new warehouse begins.

Falcon Waste Management embarked on an exciting journey with the purchase of land and a warehouse for $660,000. To ensure a smooth transition and efficient utilization of the properties, they incurred various expenditures related to the acquisition.

Expenditures Made:

The expenditures made by Falcon Waste Management in relation to the acquisition include:

  • Broker's commission: $36,000
  • Title insurance: $6,000
  • Miscellaneous closing costs: $9,000
  • Demolition costs: $24,000

Capitalization of Costs:

To determine the amounts that should be capitalized, Falcon Waste Management should consider all costs associated with the purchase and preparation of the land and warehouse. In this case, the total amount capitalized for the cost of the land is $735,000, which includes the following:

  • Purchase price: $660,000
  • Broker's commission: $36,000
  • Title insurance: $6,000
  • Miscellaneous closing costs: $9,000
  • Demolition costs: $24,000

This total amount represents the cost of the land, as all these expenditures were necessary to prepare the land for its intended use. However, no building costs will be capitalized until the construction of the new warehouse begins.

It's important for Falcon Waste Management to carefully evaluate and appropriately capitalize costs to ensure accurate financial reporting and proper allocation of resources.

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