Question

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 $708,000, with a useful life of 20 years and a $80,000 salvage value. Land Improvements 1 is valued at $413,000 and is expected to last another 14 years with no salvage value. The land is valued at $1,829,000. The company also incurs the following additional costs. $ 348, 400 189,400 Cost to demolish Building 1 Cost of additional land grading Cost to construct Building 3, having a useful life of 25 years and a $398,800 salvage value Cost of new Land Improvements 2 having a 20-year useful life and no salvage value 2,222,800 178,000 Required: 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column. Allocation of purchase price Appraised Value Percent of Total Appraised Value Total cost of acquisition - Apportioned Cost | Land Building 2 Land Improvements 1 Totals $ 0 0% Land Building 2 Building 3 Land Improvements 1 Land Improvements 2 Purchase Price Demolition Land grading New building Construction cost) New Improvements

Answer 1

D E F G 1 Ans; Percent of Total Cost Allocation of Purchase Price Appraised Value of = Apportioned Cost Total Appraised/ Value Acquisition Land Building 2 Land Improvements 1 Totals $1,829,000 $708.000 $413,000 $2.950,000 62% X $2.700.000 = 24% X $2,700,000 = 14% X $2,700,000/= 100% $1.674.000 $648.000 $378,000 $2,700,000 Land Improvements 1 Land Improvements 2 $378.000 SOV Particulars Purchase Price Demolition Land grading New building (Construction cost) New improvements cost Totals Land Building 2 | Building 3 $1,674.000 $648.000 SO $348.400 sol SO $189,400 SO SO SO $2.222.000 SOL Sol $2.211.800 $648.000 $2.222.000 SO SO SO $ SO $378,000 $178,000 $178.000

Credit 2) Date Accounts title and explanation 1-Jan Land Building 2 Building 3 Land improvements 1 Land improvements 2 Cash (To record the cost of plant assets paid in cash) Debit $2.211.800 $648.000 $2.222.000 $378,000 $178,000 $5,637.800 Debit $28.400 Date Accounts title and explanation a) 31-Dec Depreciation expense Building 2 Accumulated depreciation Building 2 (To record depreciation expense of Building 2) Credit =648000-80000)/20 $28.400 $72.960 b) 31-Dec Depreciation expense—Building 3 Accumulated depreciation Building 3 (To record depreciation expense of Building 3) =(2222000-398000/25 $72.960 $27,000 c) 31-Dec Depreciation expense Land improvements 1 Accumulated depreciation—Land improvements 1 |(To record depreciation expense of land improvements 1) =378000/14 $27,000 $8.900 d) 31-Dec Depreciation expenseLand improvements 2 Accumulated depreciation Land improvements 2 (To record depreciation expense of land improvements 2) =178000/20 $8.900

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Ans; Allocation of Purchase Price Appraised Value Percent of Total Appraised Value Total Cost of Acquisition Apportioned Cost 2 1) Land Building 2 Land Improvements 1 Totals 1829000 708000 413000 =SUM(C3:C5) =C3/SCS6 =C4/SCS6 =C5/SCS6 1 x 2700000 x 2700000 x 2700000 =D3*F3 =D4*F4 =D5*F5 =SUM(H3:H5) Building 2 =H4 Building 3 Land Improvements 1 Land Improvements 2 =H5 Particulars Land Purchase Price =H3 Demolition 348400 Land grading 189400 New building (Construction cost) O New improvements cost Totals =SUM(C9:C13) 2222000 178000 =SUM(19:113) =SUM(D9-D13) =SUM(F9:F13) =SUM(H9 H13)