In January 2013, ProTech Co. pays $1,550,000 for a tract

In January 2013, ProTech Co. pays $1,550,000 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 $482,800, with a useful life of 15 years and a $99,500 salvage value. A lighted parking lot near Building B has improvements (Land Improvements B) valued at $ 142,000 that are expected to last another five years with no salvage value. Without the buildings and improvements, the tract of land is valued at $ 795,200. The company also incurs the following additional costs.

Cost to demolish Building A . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 122,000

Cost of additional land grading . . . . . . . . . . . . . . . . . . . . . . . . . 174,500

Cost to construct new building (Building C), having a

useful life of 20 years and a $ 258,000 salvage value . . . . . . . . . 1,458,000

Cost of new land improvements (Land Improvements C) near Building

C, having a 10- year useful life and no salvage value . . . . . . . . . . 103,500


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 ProTech to the appropriate columns and total each column (round percents to the nearest 1%).

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

3. 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.


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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