Required information [The following information applies to the questions displayed below.] On January 1, Mitzu Company pays a lump-sum amount of $2,650,000 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 $750,000, with a useful life of 20 years and a $90,000 salvage value. Land Improvements 1 is valued at $330,000 and is expected to last another 11 years with no salvage value. The land is valued at $1,920,000. 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 $ 345,400 193,400 2,262,000 173,000 Required: 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column. Allocation of Purchase Price Appraised Value Percent of Total Appraised Value Total cost of acquisition Land $ 1,920,000 Building 2 Land Improvements 1 750,000 330,000 64% x 25% Totals $ 3,000,000 11% x 100% $ 2,650,000 2,650,000 2,650,000 = $ = = $ Purchase Price Demolition Land grading New building (Construction cost) New improvements Totals Land Building 2 Building 3 Apportioned Cost 1,696,000 662,500 291,500 2,650,000 Land Land Improvements 1 Improvements 2 $ 0 $ 0 $ 0 $ 0 $ 0
Required information [The following information applies to the questions displayed below.] On January 1, Mitzu Company pays a lump-sum amount of $2,650,000 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 $750,000, with a useful life of 20 years and a $90,000 salvage value. Land Improvements 1 is valued at $330,000 and is expected to last another 11 years with no salvage value. The land is valued at $1,920,000. 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 $ 345,400 193,400 2,262,000 173,000 Required: 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column. Allocation of Purchase Price Appraised Value Percent of Total Appraised Value Total cost of acquisition Land $ 1,920,000 Building 2 Land Improvements 1 750,000 330,000 64% x 25% Totals $ 3,000,000 11% x 100% $ 2,650,000 2,650,000 2,650,000 = $ = = $ Purchase Price Demolition Land grading New building (Construction cost) New improvements Totals Land Building 2 Building 3 Apportioned Cost 1,696,000 662,500 291,500 2,650,000 Land Land Improvements 1 Improvements 2 $ 0 $ 0 $ 0 $ 0 $ 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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