On January 1, Mitzu Company pays a lump-sum amount of $2,650,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $780,000, with a useful life of 20 years and a $75,000 salvage value. Land Improvements 1 is valued at $360,000 and is expected to last another 12 years with no salvage value. The land is valued at $1,860,000. The company also incurs the following additional costs. Cost to demolish Building 1 $ 348,400 Cost of additional land grading 195,400 Cost to construct Building 3, having a useful life of 25 years and a $398,000 salvage value 2,242,000 Cost of new Land Improvements 2, having a 20-year useful life and no salvage value 168,000 Record the year-end adjusting entry for the depreciation expense of Building 2. Note: Enter debits before credits. Date General Journal Debit Credit December 31 Record the year-end adjusting entry for the depreciation expense of Building 3. Note: Enter debits before credits. Date General Journal Debit Credit December 31 Record the year-end adjusting entry for the depreciation expense of Land Improvements 1. Note: Enter debits before credits. Date General Journal Debit Credit December 31 Record the year-end adjusting entry for the depreciation expense of Land Improvements 1. Note: Enter debits before credits. Date General Journal Debit Credit December 31 Record the year-end adjusting entry for the depreciation expense of Land Improvements 2. Note: Enter debits before credits. Date General Journal Debit Credit December 31

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, Mitzu Company pays a lump-sum amount of $2,650,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $780,000, with a useful life of 20 years and a $75,000 salvage value. Land Improvements 1 is valued at $360,000 and is expected to last another 12 years with no salvage value. The land is valued at $1,860,000. The company also incurs the following additional costs.

Cost to demolish Building 1	$ 348,400
Cost of additional land grading	195,400
Cost to construct Building 3, having a useful life of 25 years and a $398,000 salvage value	2,242,000
Cost of new Land Improvements 2, having a 20-year useful life and no salvage value	168,000

Record the year-end adjusting entry for the depreciation expense of Building 2.