Question

! Required information The following information applies to the questions displayed below.] Timberly Construction makes a lump-sum purchase of several assets on January 1 at a total cash price of $830,000. The estimated market values of the purchased assets are building, $506,150; land, $305,600; land improvements, $47,750; and four vehicles, $95,500 Required: 1-a. Allocate the lump-sum purchase price to the separate assets purchased. 1-b. Prepare the journal entry to record the purchase. 2. Compute the first-year depreciation expense on the building using the straight-line method, assuming a 15-year life and a $29,000 salvage value. 3. Compute the first-year depreciation expense on the land improvements assuming a five-year life and double-declining-balance depreciation.

Answer 1

1A)

Allocation of Total Cost	Appraised Value	Percent of Total Appraised Value	x	Total Cost of Acquistion	Apportioned Cost
Building	506,150.00	53%	x	830,000.00	439,900.00
Land	305,600.00	32%	x	830,000.00	265,600.00
Land Improvements	47,750.00	5%	x	830,000.00	41,500.00
Vehicles	95,500.00	10%	x	830,000.00	83,000.00
Total	955,000.00	100%			830,000.00

1B)

Date	General Journal	Debit	Credit
Jan-01	Building	439,900.00
	Land	265,600.00
	Land Improvements	41,500.00
	Vechicles	83,000.00
	Cash		830,000.00

2)Depreciation Expense on Building = (439,900-29,000)/15 Years

=27,393

3)Depreciation Expense on Land Improvements = 41,500 x 1/5 x 2 = 16,600