Question

Required information [The following information applies to the questions displayed below On January 1, Mitzu Co. pays a lump-sum amount of $2,700,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $780,000, with a useful life of 20 years and a $85,000 salvage value. Land Improvements 1 is valued at $450,000 and is expected to last another 15 years with no salvage value. The land is valued at $1,770,000. The company also incurs the following additional costs. Cost to demolish Building 1 Cost of additional land grading Cost to construct Building 3, having a useful life of 25 years and a $402,000 salvage value Cost of new Land Improvements 2 having a 20-year useful life and no salvage value $338,400 189,400 2,202,000 178,000 2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1. View transaction list Journal entry worksheet 1 CEN of 14 <Prex 6 Next> 25 NOV 21 un

Answer 1

Solution: 1 Allocate costs incurred by Mitzu Percentage of Appraised Total Appraised Allocation of purchase price | Value Value Land $1,770,000 59% Building 2 $780,000 26% Land Improvements 1 $450,000 15% Totals $3,000,000 100% Total cost of x acquisition x $2,700,000 $2,700,000 $2,700,000 = = Apportioned Cost $1,593,000 $702,000 $405,000 $2,700,000 Land Land Building 2 Building 3 improvements 1 improvements 2 $702,000 $405,000 Land $1,593,000 $338,400 $189,400 Purchase Price Demolition Land grading New building Construction cost) New improvements cost Totals 0 $2,202,000 $178,000 $178,000 $2,120,800 $702,000 $2,202,000 $405,000 Credit od journal entry Date General Journal Jan-01 Land Building 2 Land improvements 1 Land improvements 2 Building 3 Cash (To record all the incurred costs are paid in cash) Debit $2,120,800 $702,000 $405,000 $178,000 $2,202,000 $5,607,800