Fullerton Waste Management Land and Warehouse Acquisition Analysis

Cost Basis Calculation for Fullerton Waste Management

Fullerton Waste Management purchased a piece of land and warehouse for $720,000. Along with the purchase price, the company also incurred the following expenses related to the acquisition: broker's commission of $42,000 and title insurance of $2,000. Assuming that Fullerton decides to use the warehouse rather than demolish it, let's calculate the total cost basis for the acquisition.

Calculation:

1. Purchase Price: $720,000

2. Broker's Commission: $42,000

3. Title Insurance: $2,000

Final Answer:

The total cost basis for Fullerton Waste Management is $764,000 ($720,000 + $42,000 + $2,000).

Explanation:

When Fullerton Waste Management purchased the land and warehouse for $720,000, they also made expenditures related to the acquisition, including a broker's commission of $42,000 and title insurance of $2,000. To find the total cost basis, we need to add all of these expenditures to the purchase price of the land and warehouse:

Total Cost Basis = Purchase Price + Broker's Commission + Title Insurance

Total Cost Basis = $720,000 + $42,000 + $2,000

Total Cost Basis = $764,000

Therefore, the total cost basis for Fullerton Waste Management is $764,000. This amount will be important for the company in determining future gains or losses on the property, especially if they decide to sell or make improvements to the warehouse.