Question

Timberly Construction negotiates a lump sum purchase of several assets from a company that is going out of business. The purchase is completed on January 1, 2017, at a total cash price of $840,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $487,050, land, $296,050, land improvements, $47,750, and four vehicles, $124,150. The company's fiscal year ends on December 31. Required: 1-a. Prepare a table to allocate the lump-sum purchase price to the separate assets purchased. 1-b. Prepare the journal entry to record the purchase. 2. Compute the depreciation expense for year 2017 on the building using the straight-line method, assuming a 15-year life and a $28,000 salvage value. 3. Compute the depreciation expense for year 2017 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 1A Required 18 Required 2 Required 3 Prepare a table to allocate the lump-sum purchase price to the separate assets purchased Allocation of total cost Appraised Value Percent of Total Appraised Value Total cost of Acquisition Apportioned Cost Building Land Land improvements Vehicles Total

Answer 1

Timberly Construction
Part 1.1 - Allocation table
Allocation of total cost	Appraised value	% of total appraised value	Total cost of Acquisition	Apportioned cost
Building	487050	0.51	840000	428400
lAnd	296050	0.31	840000	260400
Land Improvements	47750	0.05	840000	42000
Vehicles	124150	0.13	840000	109200
Total	955000	1		840000
Part 1.2 - Journal entry
		Dr. ($)	Cr ($)
Jan.1	Building	428400
	lAnd	260400
	Land Improvements	42000
	Vehicles	109200
	Cash		840000
Part 2 - Journal entry
Dec.31	Dep. Exp. - Building	26693		(428400 - 28000 ) / 15
	Acc. Dep. - building		26693
Part 3 - Journal entry
Dec.31	Dep. Exp. - Land imp.	16800		SLM rate = 1/5 = 20%
	Acc. Dep.-Land imp.		16800	DDB rate - 20 % * 2 = 40 %
				Dep. = 42000 * 40 % = 16800