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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

  Cost of additional land grading

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

 

 

 

 

 

 

 

 

 

 

 

 

Land   grading

 

 

 

 

 

 

 

 

 

 

 

 

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

  Cost of additional land grading

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

 

 

 

 

 

 

 

 

 

 

 

 

Land   grading

 

 

 

 

 

 

 

 

 

 

 

 

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
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Accounting 3 Weeks Ago 34 Views
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