On January 1, ProTech Co. pays a lump-sum amount of $1,550,000 for land, Building A, Building B, and Land Improvements B. Building A has no value and will be demolished. Building B will be an office and is appraised at $482,800, with a useful life of 15 years and a $99,500 salvage value. Land Improvements B is valued at $142,000 and is expected to last another five years with no salvage value. The land is valued at $795,200. The company also incurs the following additional costs. Cost to demolish Building A . $ 122,000 Cost of additional land grading. $174,500 Cost to construct Building C, having a useful life . Cost of new Land Improvements C, having a 10-year of 20 years and a $258,000 salvage value 1,458,000 useful life and no salvage value . 103,500 Required 1. Prepare a table with the following column headings: Land, Building B, Building C, Land Improvements B, and Land Improvements C. Allocate the costs incurred by ProTech to the appropriate columns and total each column. 2. Prepare a single journal entry to record all incurred costs assuming they are paid in cash on January 1. 3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the first year these assets were in use.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On January 1, ProTech Co. pays a lump-sum amount of $1,550,000 for land, Building A, Building B, and
Land Improvements B. Building A has no value and will be demolished. Building B will be an office and
is appraised at $482,800, with a useful life of 15 years and a $99,500 salvage value. Land Improvements
B is valued at $142,000 and is expected to last another five years with no salvage value. The land is valued
at $795,200. The company also incurs the following additional costs. Cost to demolish Building A . $ 122,000 Cost of additional land grading. $174,500
Cost to construct Building C, having a useful life . Cost of new Land Improvements C, having a 10-year
of 20 years and a $258,000 salvage value 1,458,000 useful life and no salvage value . 103,500
Required
1. Prepare a table with the following column headings: Land, Building B, Building C, Land Improvements
B, and Land Improvements C. Allocate the costs incurred by ProTech to the appropriate columns and
total each column.
2. Prepare a single
3. Using the straight-line method, prepare the December 31
the first year these assets were in use.
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