On January 1, Mitzu Company pays a lump-sum amount of $2,800,000 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 $678, 500, with a useful life of 20 years and a $ 75,000 salvage value. Land Improvements 1 is valued at $560, 500 and is expected to last another 19 years with no salvage value. The land is valued at $1,711,000. The company also incurs the following additional costs. Cost to demolish Building 1 $ 341,400 Cost of additional land grading 185, 400 Cost to construct Building 3, having a useful life of 25 years and a $ 398,000 salvage value 2,222,000 Cost of new Land Improvements 2, having a 20-year useful life and no salvage value 173,000 2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1.

On January 1, Mitzu Company pays a lump-sum amount of $2,800,000 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 $678, 500, with a useful life of 20 years and a $ 75,000 salvage value. Land Improvements 1 is valued at $560, 500 and is expected to last another 19 years with no salvage value. The land is valued at $1,711,000. The company also incurs the following additional costs. Cost to demolish Building 1 $ 341,400 Cost of additional land grading 185, 400 Cost to construct Building 3, having a useful life of 25 years and a $ 398,000 salvage value 2,222,000 Cost of new Land Improvements 2, having a 20-year useful life and no salvage value 173,000 2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

5. 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 $793,000, with a useful life of 20 years and a $70,000 salvage value. Land Improvements 1 is valued at $305,000 and is expected to last another 10 years with no salvage value. The land is valued at $1,952,000. The company also incurs the following additional costs. Cost to demolish Building 1 $ 348,400 Cost of additional land grading 187,400 Cost to construct Building 3, having a useful life of 25 years and a $400,000 salvage value 2,202,000 Cost of new Land Improvements 2, having a 20-year useful life and no salvage value 178,000 2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1.
Blue Inc. acquired some manufacturing equipment in January 2018 for $400,000 and depreciated it $40,000 each year for three years on a straight-line basis. During 2021, the manufacturer announced a new technology for this type of equipment that will make the old models obsolete by the end of 2024. As a result, Blue will plan to replace the equipment at that time, effectively reducing the asset's life from ten to seven years. In its financial statements for 2021, Blue should: A. Charge $280,000 in depreciation expense. B. Report the book value of the equipment in its December 31,2021 balance sheet at $210,000. C. Make an adjustment to retained earnings for the error in measuring depreciation during 2018-2020. D. None of these answer choices are correct. O B O D O o o0
Berry purchased a building (including land) for $711,000. Berry plans to use the building. The land’s value on the purchase date was $159,000, and the building’s value was $552,000. Berry gave a cash down payment of 20% of the total purchase cost and signed a promissory note for the remainder. The company estimates the building will have a useful life of 25 years and a salvage value of $81,000. What is the journal entry for this?
At the beginning of the year, Big Time Tires acquired a patent for $730,000, and a trademark for $260,000. Big Time Tire's policy is to amortize intangible assets with finite useful lives using the straight-line method, no residual value, and a five-year service life. What is the total amount of amortization expense that would appear in Big Time Tire's income statement for the first year related to these items? Amortization expense
SIMCO Company purchases a machine on 1/1/2020, at a cost of $24,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. On 1/1/2022, management decides to change the useful life to 7 years, instead of 5 years, and keep salvage value the same.
On January 1, Year 1, Lowing Company acquired a patent from Generics Research Corporation for $3 million. The legal life of the patent is 20 years, but Lowing expects to use it for 5 years. Pawson Company has committed to purchase the patent from Lowing for $500,000 at the end of that 5-year period. Lowing uses the straight-line method to amortize intangible assets with finite useful lives. What is the amount of amortization expense each year?
On January 1, the Matthews Band pays $66,600 for sound equipment. The band estimates it will use this equipment for five years and after five years it can sell the equipment for $2,000. Matthews Band uses straight-line depreciation but realizes at the start of the second year that this equipment will last only a total of three years. The salvage value is not changed. Compute the revised depreciation for both the second and third years.
On March 31, 2024, a company purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway construction. The cost of the quarry rights was $232,200, with estimated salable rock of 27,000 tons. During 2024, The company loaded and sold 5,000 tons of rock and estimated that 22,000 tons remained on December 31, 2024. On January 1, 2025, the company estimated that 10,000 tons still remained. During 2025, the company loaded and sold 15,000 tons. The company uses the units-of-production method. The company would record depletion in 2024 in the amount of: Note: Do not round depletion rate per ton. Multiple Choice $43,340. $52,773. $32,250. $43,000.
Sturdivant Company owns an executive plane that originally cost $1,280,000. It has recorded straight‑line depreciation on the plane for seven full years, calculated assuming a $160,000 expected salvage value at the end of its estimated 10‑year useful life. Sturdivant sells the plane at the end of the seventh year for $200,000. Calculate the gain or loss on the sale of the plane. (Round your answer to the nearest whole number. If a loss, type a minus sign “-” at the beginning of your answer; do not include a space after the minus sign. Do not include a $ sign.)
On January 2, 2018, Lapar Corporation purchased a machine for $50,000. Lapar paid shipping expenses of $500, as well as installation costs of $1,200. The company estimated that the machine would have a useful life of 10 years and a residual value of $3,000. On January 1, 2019, Lapar made additions costing $3,600 to the machine in order to comply with pollution-control ordinances. These additions neither prolonged the life of the machine nor increased the residual value. 1. If Lapar records depreciation expense under the straight-line method, how much is the depreciation expense for 2019? 2. Assume Lapar determines the machine has three significant components as shown below. Component Amount Service Life Salvage Value $25,000 10 years $3,000 15,000 5 years 11,700 3 years If Lapar uses IFRS, what is the amount of depreciation expense that would be recorded? A B с 0 0
Pinky and the Brain Ltd acquired an item of plan at a gross cost of $680,000 on October 20X2. The plant has an estimated life of 10 years with residual value equal to 15% of its gross cost. The company uses straight line depreciation charge on a time-apportioned basis. The company received a government grant of 30% of its cost price at the time of its purchase. The terms of the grant are that if the company retains the asset for four years or more, then no repayment liability will be incurred. If the plant is sold within four years a repayment on a sliding scale would be applicable. The repayment is 75% if sold within the first year of purchase and this amount decreases by 25% per annum. Pinky and the Brain Ltd has no intention to sell the plant within the first four years. The company's accounting policy for capital based government grants is to treat them as deferred credits and release them to income over the life of the asset to which they relate. Required: a. Discuss whether the…
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 $793,000, with a useful life of 20 years and a $75,000 salvage value. Land Improvements 1 is valued at $427,000 and is expected to last another 14 years with no salvage value. The land is valued at $1,830,000. 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 $398,000 salvage value Cost of new Land Improvements 2, having a 20-year useful life and no salvage value Problem 8-3A (Algo) Part 3 3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the first year these assets were in use. View transaction list Journal entry worksheet 2 3 4 Record the year-end adjusting entry for the…