/ Homework Answers / Accounting / In January 2013, Mitzu Co. pays \$2,650,000 for a tract
Not my Question
Flag Content

# Question

In January 2013, Mitzu Co. pays \$2,650,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at \$823,500, with a useful life of 20 years and an \$75,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at \$305,000 that are expected to last another 10 years with no salvage value. Without the buildings and improvements, the tract of land is valued at \$1,921,500. The company also incurs the following additional costs:

Cost to demolish Building 1

\$

346,400

189,400

Cost to construct new building (Building 3), having a useful life

of 25 years and a \$402,000 salvage value

2,222,000

Cost of new land improvements (Land Improvements 2) near Building 2     having a 20-year useful life and no salvage value

173,000

Total costs

7,965,799

Allocation   of purchase price

Appraised   value

Percent   of total appraized value

X

Total   cost of acquisition

=

Apportioned   cost

Land

x

=

Building   2

x

=

Land   improvements 1

x

=

Total

Land

Building   2

Building   3

Land   Improvements 1

Land   Improvements 2

Purchase   Price

Demolition

New   Building (Construction cost)

New   Improvements cost

Totals

2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2013.

Journal Entry Worksheet

Journal Entry Worksheet

Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2013 when these assets were in use.

In January 2013, Mitzu Co. pays \$2,650,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at \$823,500, with a useful life of 20 years and an \$75,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at \$305,000 that are expected to last another 10 years with no salvage value. Without the buildings and improvements, the tract of land is valued at \$1,921,500. The company also incurs the following additional costs:

Cost to demolish Building 1

\$

346,400

189,400

Cost to construct new building (Building 3), having a useful life

of 25 years and a \$402,000 salvage value

2,222,000

Cost of new land improvements (Land Improvements 2) near Building 2     having a 20-year useful life and no salvage value

173,000

Total costs

7,965,799

Allocation   of purchase price

Appraised   value

Percent   of total appraized value

X

Total   cost of acquisition

=

Apportioned   cost

Land

x

=

Building   2

x

=

Land   improvements 1

x

=

Total

Land

Building   2

Building   3

Land   Improvements 1

Land   Improvements 2

Purchase   Price

Demolition

New   Building (Construction cost)

New   Improvements cost

Totals

2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2013.

Journal Entry Worksheet

Journal Entry Worksheet

Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2013 when these assets were in use.

 In January 2013, Mitzu Co. pays \$2,650,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at \$823,500, with a useful life of 20 years and an \$75,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at \$305,000 that are expected to last another 10 years with no salvage value. Without the buildings and improvements, the tract of land is valued at \$1,921,500. The company also incurs the following additional costs:

## Solution 5 (1 Ratings )

Solved
Accounting 3 Months Ago 141 Views