Reference no: EM132927076
Question - In 2015, Mark Company acquired several long-term assets to start its operations. Details are as follows:
March 31 - Acquired land for 4,950,000 inclusive of legal fees amounting to 50,000. The amount due to the seller was settled with a note that requires cash payment of 700,000 on April 1, 2015 and the balance payable in equal amounts every year for the succeeding four years. Similar notes were selling at an effective rate of 5%. The entity plans to use the land for 50 years.
April 30 - A building was purchase through the issuance of bonds payable but also required the entity to assume the mortgage from the buyer. The bonds have a 5-year term, 2,000,000 face value, 8% coupon rate. Similar bonds would yield 9%. The mortgage liability is valued at 2,000,000. The building had two years of real property tax which were not paid by the seller and assumed by the entity. The annual tax is 50,000 due every January. The entity plans to use the building for 20 years.
June 1 - A manufacturing equipment was acquired and settled through exchanging its investment in shares. The shares had a fair value of 5,400,000 and a par value of 4,000,000. Historically, it has not resulted to any dividends nor significant price changes. The equipment has a cash price of 5,200,000. The difference is settled in cash. Other related costs include 50,000 dismantling cost of old equipment, 560,000 input VAT included in the cash price, 100,000 import duties, and freight-in of 80,000. The equipment has a useful life of 5 years and is to be depreciated to a salvage value of 500,000.
Required - What is the Carrying Value of the entity's land on December 31, 2015. Solutions must be in good accounting form.
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