Question

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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 $900,000. The estimated market values of the purchased assets are building. $508,800; land, $297600 land improvements, $28,800 and four vehicles, $124,800 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 $27,000 salvage value. 3. Compute the first-year depreciation expense on the land improvements assuming a five-year life and double-declining-balance depreciation Complete this question by entering your answers in the tabs below. Required 3 Required 1A Required 18 Required 2 Allocate the lump-sum purchase price to the separate assets purchased Apportioned Cost Allocation of Total Cost Appraised Value Percent of Total Appraised Value Total cost of Acquisition Building 508,800 % x 297,600 28,800 Land % x % x | Land improvements Vehicles 124,800 %x 960,000 0 0 % Total Resjuled A Required 1B

Answer 1

Ans 1 Apportioned Cost The purchase price paid will be allocated among the assets based on the ratio of their market value Total Cost of Allocation of Total Cost Appraised Value %age Total Appraised Value Acquisition building $508,800 53.00% ($508800 / $960000] X $900,000 land $297,600 31.00% ($297600 / $960000] $900,000 land improvements $28,800 3.00% ($28800 / $960000] $900,000 vehicles $124,800 13.00% ($124800 / $960000] $900,000 Total $960,000 1.00 $477,000 ($900000 x 53%] $279,000 $900000 x 31%] $27,000 $900000 x 3%] $117,000 $900000 x 13%) $900,000 Ans 2 Credit Account Title Building Land Land Improvements Vehicles Cash (To record asset purchase) Debit $477,000 $279,000 $27,000 $117,000 $900,000 Ans 3 Straight Line Depreciation = (Cost-Salvage Value /useful life Cost of building $477,000 Salvage Value $27,000 Useful life Depreciation for first year $30,000 [($477000 - $27000)/15] Ans 4 Double Declining Balance Method = 2/Useful Life x Book Value Book Value of Land improvements $27,000 Useful life Depreciation for first year $10,800 [2/5 x $27000]