Question

In January 2011, Boulware Co. pays $2,750,000 for a tract of land with two buildings. It plans to demolish Building A and build a new shop in its place. Building B will be a company office; it is appraised at $687,700, with a useful life of 20 years and an $85,000 salvage value. A lighted parking lot near Building B has improvements (Land Improvements B) valued at $478,400 that are expected to last another 10 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,823,900. Boulware also incurs the following additional costs.
Cost to demolish Building A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 345,400
Cost of additional land grading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,400
Cost to construct new building (Building C), having a useful life of 25 years
and a $400,000 salvage value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,282,000
Cost of new land improvements (Land Improvements C) near Building C,
having a 20-year useful life and no salvage value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,000
Required
1. Prepare a table with the following column headings: Land, Building B, Building C, Land Improvements B and Land Improvements C. Allocate the costs incurred by Boulware to the appropriate columns and total each column.
2. Prepare a single journal entry to record all incurred costs assuming they are paid in cash on January 1, 2011.
3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2011 when these assets were in use.


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  • CreatedMarch 18, 2015
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