Chapter 8 Problems

In January 2015, Mitzu Co. pays $2,700,000 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 $780,000, with a useful life of 20 years and a $75,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $390,000 that are expected to last another 13 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,830,000. The company also incurs the following additional costs:

Cost to demolish Building 1	$	341,400
Cost of additional land grading		187,400
Cost to construct new building (Building 3), having a useful life of 25 years and a $400,000 salvage value		2,282,000
Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value		173,000

Chapter 8 Problems

.	Allocate the costs incurred by Mitzu to the appropriate columns and total each column. (Round your percentage answers to the nearest whole number.)

Chapter 8 Problems

2.	Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2015.

Chapter 8 Problems

3.	Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2015 when these assets were in use.