Problem 8-3A Asset cost allocation; straight-line depreciation LO C1, P1 [The following information applies to the...

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Problem 8-3A Asset cost allocation; straight-line depreciation LO C1, P1 [The following information applies to the questions displayed below] In January 2017, 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 $750,000, with a useful life of 20 years and a $80,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $360,000 that are expected to last another 12 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,890,000. The company also incurs the following additional costs: Cost to demolish Building 1 Cost of additional land grading Cost to construct new building (Building 3), having a useful life of 25 years and a $400,000 salvage value Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value Problem 8-3A Part 1 Required: 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column. Allocation of purchase price Land Building 2 Land Improvements 1 Totals Purchase Price Demolition Land grading New building (Construction cost) New improvements Totals Appraised Value S S 1,890,000 750,000 360,000 3,000,000 $ Land Percent of Total Appraised Value Building 2 $ 1.701,000 $ 675,000 341,400 187,400 2,229,800 $ 63% X 25% x 12% 100% X 675,000 x Total cost of acquisition $ 2,700,000 S 2,700,000 = 2,700,000 Building 3 2.262.000 2.262.000 Apportioned Cost $ $ $ 341,400 187,400 2,262,000 168,000 $ S 1,701,000 675,000 Land Land Improvements 1. Improvements 2 324,000 324,000 2,700,000 324 000 $ 2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2017. View transaction list Journal entry worksheet Record the cost of the plant assets, paid in cash. Note: Enter debits before credits. Date Jan 01 Record entry General Journal Clear entry Debit Credit View general journal Problem 8-3A Part 3 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. View transaction list 1 Record the year-end adjusting entry for the depreciation expense of Building 2. 2 Record the year-end adjusting entry for the depreciation expense of Building 3. 3 Record the year-end adjusting entry for the depreciation expense of Land Improvements 1. 4 Record the year-end adjusting entry for the depreciation expense of Land Improvements 2. Note: = journal entry has been entered Record entry Clear entry X 1 1 1 Building Credit View general journal Problem 8-3A Asset cost allocation; straight-line depreciation LO C1, P1 [The following information applies to the questions displayed below] In January 2017, 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 $750,000, with a useful life of 20 years and a $80,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $360,000 that are expected to last another 12 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,890,000. The company also incurs the following additional costs: Cost to demolish Building 1 Cost of additional land grading Cost to construct new building (Building 3), having a useful life of 25 years and a $400,000 salvage value Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value Problem 8-3A Part 1 Required: 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column. Allocation of purchase price Land Building 2 Land Improvements 1 Totals Purchase Price Demolition Land grading New building (Construction cost) New improvements Totals Appraised Value S S 1,890,000 750,000 360,000 3,000,000 $ Land Percent of Total Appraised Value Building 2 $ 1.701,000 $ 675,000 341,400 187,400 2,229,800 $ 63% X 25% x 12% 100% X 675,000 x Total cost of acquisition $ 2,700,000 S 2,700,000 = 2,700,000 Building 3 2.262.000 2.262.000 Apportioned Cost $ $ $ 341,400 187,400 2,262,000 168,000 $ S 1,701,000 675,000 Land Land Improvements 1. Improvements 2 324,000 324,000 2,700,000 324 000 $ 2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2017. View transaction list Journal entry worksheet Record the cost of the plant assets, paid in cash. Note: Enter debits before credits. Date Jan 01 Record entry General Journal Clear entry Debit Credit View general journal Problem 8-3A Part 3 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. View transaction list 1 Record the year-end adjusting entry for the depreciation expense of Building 2. 2 Record the year-end adjusting entry for the depreciation expense of Building 3. 3 Record the year-end adjusting entry for the depreciation expense of Land Improvements 1. 4 Record the year-end adjusting entry for the depreciation expense of Land Improvements 2. Note: = journal entry has been entered Record entry Clear entry X 1 1 1 Building Credit View general journal

Answer rating: 100% (QA)

1 Allocation of purchase price Appraised value Percent of total appraised value Total cost of acquis... View the full answer