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 $660,000, with a useful life of 20 years and a $75,000 salvage value. Land Improvements 1 is valued at $480,000 and is expected to last another 16 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 Cost of additional land grading Cost to construct Building 3, having a useful life of 25 years and a $402,000 salvage value Cost of new Land Improvements 2, having a 20-year useful life and no salvage value $ 348,400 189,400 2,242,000 178,000
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 $660,000, with a useful life of 20 years and a $75,000 salvage value. Land Improvements 1 is valued at $480,000 and is expected to last another 16 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 Cost of additional land grading Cost to construct Building 3, having a useful life of 25 years and a $402,000 salvage value Cost of new Land Improvements 2, having a 20-year useful life and no salvage value $ 348,400 189,400 2,242,000 178,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Accounting
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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 $660,000,
with a useful life of 20 years and a $75,000 salvage value. Land Improvements 1 is valued at $480,000 and is expected to
last another 16 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
Cost of additional land grading
Cost to construct Building 3, having a useful life of 25 years and a $402,000 salvage value
Cost of new
Land Improvements 2, having a 20-year useful life and no salvage value
$ 348,400
189,400
2,242,000
178,000
Transcribed Image Text:Required:
1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column.
Allocation of Purchase Price
Land
Building 2
Land Improvements 1
Totals
Purchase Price
Demolition
Land grading
New building (Construction cost)
New improvements
Totals
Appraised
Value
Land
Percent of
Total
Appraised
Value
Building 2
X
X
X
Total cost of
acquisition
Building 3
Apportioned Cost
Land
Land
Improvements 1 Improvements 2
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