Question

Required information [The following information applies to the questions displayed below.] Part 1 of 3 On January 1, Mitzu Co. pays a lump-sum amount of $2,650,000 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 $660,000, with a useful life of 20 years and a $90,000 salvage value. Land Improvements 1 is valued at $420,000 and is expected to last another 14 years with no salvage value. The land is valued at $1,920,000. The company also incurs the following additional costs. 1.42 points $ 345,400 189,400 eBook 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 2,202,000 178,000 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 Land Building 2 Building 3 Land Improvements 1 Land Improvements 2 Purchase Price Demolition Land grading New building Construction cost) New improvements Totals

Answer 1

Assets purchased Appraised Value Total cost of acquisition Apportioned Cost Workings for Percent of Total Appraised Value: x Percent of Total Appraised value 64% 22% 14% 100% 1 x Land $1,920,000 Building 2 $660,000 Land Imp.-1 $420,000 Total appraised value $3,000,000 $2,650,000 $2,650,000 $2,650,000 x $1,696,000 $583,000 $371,000 $2,650,000 Land = ($1920000 / $3000000) x 100 = 64%; Building 2 = ($660000 / $3000000) x 100 = 22%; Land Imp.-1 = ($420000 / $3000000) x 100 = 14%; x Allocate the costs incurred by Mitzu to the appropriate columns and total each column: Building 3 Building 2 $583,000 Land Imp.-1 $371,000 Land Imp.-2 - [Ref: Part-1] Land $1,696,000 $345,400 $189,400 Purchase price Demolition Land grading New building (Construction cost) New improvements Totals $2,202,000 $2,230,800 $583,000 $2,202,000 $371,000 $ 178,000 $178,000