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Problem 8-3A Asset cost allocation; straight-line depreciation LO C1, P1

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In January 2017, Mitzu Co. pays $2,600,000 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 $644,000, with a useful life of 20 years and a $60,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $420,000 that are expected to last another 12 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,736,000. 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

Problem 8-3A Part 2

2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2017.