Question

t Chapter 10 Saved Help Required information (The following information applies to the questions displayed below.) On January 1, Mitzu Co. pays a lump sum amount of $2,600,000 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 $737,500, with a useful life ars and a $75,000 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 $1,799,500. The company also incurs the following additional costs. $ 347,400 191,400 Cost to demolish Building 1 Cost of additional land grading Cost to construct Building 3, having a useful life of 25 years and a $400,000 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

Answer 1

1
Allocation of Purchase Price	Appraised Value	Percent of Total Appraised Value	x	Total Cost of Acquisition	=	Apportioned Cost
Land	1,799,500	61%	x	2,600,000	=	1,586,000
Building 2	737,500	25%	x	2,600,000	=	650,000
Land Improvements 1	413,000	14%	x	2,600,000	=	364,000
Totals	2,950,000	100%				2,600,000
	Land	Building 2		Building 3		Land Improvements 1	Land Improvements 2
Purchase Price	1,586,000	650,000		0		364,000	0
Demolition	347,400	0		0		0	0
Land grading	191,400	0		0		0	0
New building (Construction cost)	0	0		2,222,000		0	0
New improvements cost	0	0		0		0	178,000
Totals	2124800	650000		2222000		364000	178000
Date	General Journal	Debit	Credit
Jan 1	Land	2,124,800
	Building 2	650,000
	Building 3	2,222,000
	Land improvements 1	364,000
	Land improvements 2	178,000
	Cash		5,538,800
2
Date	General Journal	Debit	Credit
Dec 31	Depreciation expense—Building 2	28,750		=(650000-75000)/20
	Accumulated depreciation—Building 2		28,750
Dec 31	Depreciation expense—Building 3	72,880		=(2222000-400000)/25
	Accumulated depreciation—Building 3		72,880
Dec 31	Depreciation expense—Land improvements 1	26,000		=364000/14
	Accumulated depreciation—Land improvements 1		26,000
Dec 31	Depreciation expense—Land improvements 2	8,900		=178000/20
	Accumulated depreciation—Land improvements 2		8,900