On January 1, Mitzu Company pays a lump-sum amount of $2,6C Improvements 1. Building 1 has no value and will be demolished.
On January 1, Mitzu Company pays a lump-sum amount of $2,6C Improvements 1. Building 1 has no value and will be demolished.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 8-3A (Static) Asset cost allocation; straight-llne depreclation LO C1, P1
[The following information applies to the questions displayed below.]
On January 1, Mitzu Company pays a lump-sum amount of $2,600,000 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 $644,000,
with a useful life of 20 years and a $60,000 salvage value. Land Improvements 1 is valued at $420,000 and is expected to
last another 12 years with no salvage value. The land is valued at $1,736,000. The company also incurs the following
additional costs.
Cost to demolish Building 1
Cost of additional land grading
Cost to construct Building 3, having a useful life of 25 years and a $392, 000 salvage value
Cost of neW Land Improvements 2, having a 20-year useful life and no salvage value
$ 328, 400
175, 400
2, 202, 000
164, 000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F97b5df25-1667-438a-b46e-c2a0d1ae7c86%2F0eaddae7-b8b6-4ef0-8c08-d4ec9775824b%2Fa43109e_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
Problem 8-3A (Static) Asset cost allocation; straight-llne depreclation LO C1, P1
[The following information applies to the questions displayed below.]
On January 1, Mitzu Company pays a lump-sum amount of $2,600,000 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 $644,000,
with a useful life of 20 years and a $60,000 salvage value. Land Improvements 1 is valued at $420,000 and is expected to
last another 12 years with no salvage value. The land is valued at $1,736,000. The company also incurs the following
additional costs.
Cost to demolish Building 1
Cost of additional land grading
Cost to construct Building 3, having a useful life of 25 years and a $392, 000 salvage value
Cost of neW Land Improvements 2, having a 20-year useful life and no salvage value
$ 328, 400
175, 400
2, 202, 000
164, 000
Transcribed Image Text:Required:
1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column.
Percent of
Appraised
Value
Total
Appraised
Value
Total Cost of
Allocation of Purchase Price
Apportioned Cost
Acquisition
Land
%3!
Building 2
Land Improvements 1
%3D
Totals
24
0%
$24
10
Land
Land
Land
Building 2
Building 3
Improvements 1
Improvements 2
Purchase Price
Demolition
Land grading
New building (Construction cost)
New improvements
Totals
24
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