In January 2017, Mitzu Co. pays $2,600,000 for a tract of land with two buildings on it.
Question:
The company also incurs the following additional costs:
Cost to demolish Building 1 ................................................... $ 328,400
Cost of additional land grading ................................................ 175,400
Cost to construct new building (Building 3), having a useful life
of 25 years and a $392,000 salvage value .................................... 2,202,000
Cost of new land improvements (Land Improvements 2) near Building 2
having a 20-year useful life and no salvage value .......................... 164,000
Required
1. Prepare a table with the following column headings: Land, Building 2, Building 3, Land Improvements 1, and Land Improvements 2. Allocate the costs incurred by Mitzu to the appropriate columns and total each column (round percents to the nearest 1%).
2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2017.
3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2017 when these assets were in use.
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Related Book For
Fundamental Accounting Principles
ISBN: 978-1259536359
23rd edition
Authors: John Wild, Ken Shaw, Barbara Chiappett
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