Real estate was purchased by a Company for $1,280,000, which also included $5,000 in legal fees. It paid $255,000 cash and incurred a mortgage payable for the balance. The real estate consisted of a plot of land appraised at $476,000, a building appraised at $748,000, and fences and other land improvements appraised at $136,000. The building has a $50,000 residual value and a 60-year estimated usable life. The usable life of land improvements is around 15 years, and they have no residual value. a) Calculate the cost that should be allocated to each asset purchased. b) Record the purchase of the real estate. c) Calculate the annual depreciation expense for the building and land improvements assuming the Company uses straight-line depreciation.
Accounting Question:
1. Real estate was purchased by a Company for $1,280,000, which also included $5,000 in legal fees. It paid $255,000 cash and incurred a mortgage payable for the balance. The real estate consisted of a plot of land appraised at $476,000, a building appraised at $748,000, and fences and other land improvements appraised at $136,000. The building has a $50,000 residual value and a 60-year estimated usable life. The usable life of land improvements is around 15 years, and they have no residual value.
a) Calculate the cost that should be allocated to each asset purchased.
b) Record the purchase of the real estate.
c) Calculate the annual
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