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Worked-example setupScope and assumptions
- Cedar Works is a fictional US GAAP entity, and every amount and classification fact is supplied for instruction.
- The old structure was acquired only for demolition; the grading permanently readies the ground, and the paving has a separate limited life.
- The vendor's supported current cash selling price for the second building is $245,000; valuation and market-rate selection are outside the example.
- Period
- Acquisition date
- Units
- US dollars
- Rounding
- Whole US dollars; no rounding required
Sort the property by what each cost readies
Cedar Works pays $720,000 for a site containing an old structure that it will never use. Demolition costs $30,000, salvage proceeds are $5,000, and permanent grading costs $15,000. A parking lot costs $42,000. A new building costs $1,100,000 to construct and ready.
Land is $760,000: $720,000 + $30,000 - $5,000 + $15,000. A separate limited life makes the $42,000 parking lot a land improvement. Construction produces a $1,100,000 building. Together, the three assets reconcile to the complete $1,902,000 expenditure population.
The sort preserves later accounting. Land is not depreciated under the supplied facts. The parking lot and building enter separate depreciation schedules with supported readiness dates, useful lives, salvage values, and methods.
Separate a second building from its financing
Cedar Works also receives a small building for a $300,000 noninterest-bearing note. The vendor's supported current cash selling price is $245,000. Record the building and opening note carrying amount at $245,000. The $55,000 difference reconciles the present value to face amount and is recognized as interest over the note's term.
This example does not estimate a market rate. If neither a supported exchange price nor adequate rate evidence is available, stop and obtain that evidence before measuring the note.
Review the two controls
The property schedule ties every cost to the asset it readies. The note schedule keeps the building's current acquisition cost separate from the price of waiting to pay. A tied schedule does not prove the supplied classifications or selling price; those conclusions still need source evidence.
Verified calculation · scoped sums
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- amounts
- 8 fields
Inspect data
{
"building_construction": 1100000,
"cash_equivalent_building_price": 245000,
"demolition_cost": 30000,
"grading_cost": 15000,
"note_discount": 55000,
"paving_cost": 42000,
"salvage_proceeds": -5000,
"site_price": 720000
}- totals
- 4 fields
Inspect data
{
"constructed_building_cost": [
"building_construction"
],
"land_cost": [
"site_price",
"demolition_cost",
"salvage_proceeds",
"grading_cost"
],
"land_improvement_cost": [
"paving_cost"
],
"note_face_amount": [
"cash_equivalent_building_price",
"note_discount"
]
}Recomputed result
| Measure | Value |
|---|---|
| constructed building cost | 1,100,000 |
| land cost | 760,000 |
| land improvement cost | 42,000 |
| note face amount | 300,000 |