To compute:
The table showing the cost incurred and its allocation.

Answer to Problem 3BPSB
Solution:
First we need to calculate apportionment of purchase price-
Allocation of purchase price | Appraised value | Percentage | Allocated costs |
Land | 795,200 | 56% | 868,000 |
Building B | 482,800 | 34% | 527,000 |
Land Improvement B | 142,000 | 10% | 155,000 |
Total | 1,420,000 | 100% | 1,550,000 |
Table showing cost incurred-
Details | Land | Building B | Building C | Land Improvement B | Land Improvement C |
Purchase price | 868,000 | 527,000 | | 155,000 | |
Demolition | 122,000 | | | | |
Land grading | 174,500 | | | | |
Improvements (new) | | | | | 103,500 |
New building | | | 1,458,000 | | |
Total | 1,164,500 | 527,000 | 1,458,000 | 155,000 | 103,500 |
Explanation of Solution
Given,
Appraised value
- Land - $795,200
- Building B - $482,800
- Land Improvement B - $142,000
Now, we need to calculate the percentage allocated to each asset-
Allocation of purchase price-
Given,
- Purchase price = $1,550,000
Calculation of cost incurred-
Given,
- Purchase price of Land - $868,000 (Calculated above)
- Purchase price of Building B- $527,000 (Calculated above)
- Purchase price of Land Improvement B - $155,000 (Calculated above)
- Demolition − $122,000
- Land grading - $174,500
- Improvements- $103,500
- New building - $1,458,000 Total cost of Land −
Thus, table for allocation of costs incurred is prepared.
Requirement 2:
To prepare:
Requirement 2:

Answer to Problem 3BPSB
Solution:
Date | Accounts titles and Description | Debit ($) | Credit ($) |
Jan.1,2015 | Land | 1,164,500 | |
| Building B | 527,000 | |
| Building C | 1,458,000 | |
| Land Improvement B | 155,000 | |
| Land Improvement C | 103,500 | |
| Cash | | 3,408,000 |
| (To record plant assets purchased in cash) | | |
Explanation of Solution
In the above entry, cash account is credited as there is reduction in current assets and purchase of assets is increase in assets so accounts are debited.
Thus, journal entry to record all costs incurred is passed.
Requirement 3-
To prepare:
Requirement 3-

Answer to Problem 3BPSB
Solution:
S. No. | Date | Accounts titles and Description | Debit ($) | Credit ($) |
1 | Dec.31,2015 | Depreciation-Building B | 28,500 | |
| | | 28,500 | |
| | (To record depreciation on Building B) | | |
| | | | |
2 | Dec.31,2015 | Depreciation-Building C | 60,000 | |
| | Accumulated Depreciation | | 60,000 |
| | (To record depreciation on Building C) | | |
| | | | |
3 | Dec.31,2015 | Depreciation-Land Improvement B | 31,000 | |
| | Accumulated Depreciation | | 31,000 |
| | (To record depreciation on Land Improvement B) | | |
| | | | |
4 | Dec.31,2015 | Depreciation-Land Improvement C | 10,350 | |
| | Accumulated Depreciation | | 10,350 |
| | (To record depreciation on Land Improvement C) | | |
Explanation of Solution
Entry 1- Calculation of Depreciation expense-
Given,
- Scrap value = $99,500
- Estimated useful life = 15 years
- Cost = $527,000 (calculated in Req.1)
Entry 2- Calculation of Depreciation expense-
Given,
- Scrap value = $258,000
- Estimated useful life = 20 years
- Cost = $1,458,000 (calculated in Req.1)
Entry 3- Calculation of Depreciation expense-
Given,
- Estimated useful life = 5 years
- Cost = $155,000 (calculated in Req.1)
- It has no scrap value
Entry 4- Calculation of Depreciation expense-
Given,
- Estimated useful life = 10 years
- Cost = $103,500 (calculated in Req.1)
- It has no scrap value
Thus, depreciation expense has been calculated and entries have been passed.
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Chapter 10 Solutions
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