Accounting

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Problem 8-3A (Algo) Asset cost allocation; straight-line depreciation LO C1, P1 [The following information applies to the questions displayed below.] On January 1, Mitzu Company pays a lump-sum amount of $2,600,000 for land, Building 1, Building 2, and Land Improvements 1 . Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $854,000, with a useful life of 20 years and a $85,000 salvage value. Land Improvements 1 is valued at $305,000 and is expected to last another 10 years with no salvage value. The land is valued at $1,891,000. The company also incurs the following additional costs. Cost to demolish Building 1 Cost of additional land grading Cost to construct Building 3, having a useful life of 25 years and a $400 Cost of new Land Improvements 2, having a 20 -year useful life and no salvage value 260,400 262,000 168,000 2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1 . Journal entry worksheet Record the cost of the plant assets, paid in cash. Note: Enter debits before credits. 3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the first year these assets were in use. Journal entry worksheet Record the year-end adjusting entry for the depreciation expense of Building 2. Note: Enter debits before credits. Journal entry worksheet Record the year-end adjusting entry for the depreciation expense of Building 3. Note: Enter debits before credits. Journal entry worksheet Record the year-end adjusting entry for the depreciation expense of Land Improvements 1. Note: Enter debits before credits. Journal entry worksheet