Question

E8-4 Computing and Recording Cost and Depreciation of Assets in a Basket Purchase (Straight-Line Depreciation) LO8-2, 8-3 Zeidler Company bought a building and the land on which the building is located for a total cash price of $178,500. The company paid transfer costs of $2,100. Renovation costs on the building were $20,780. An independent appraiser provided market values for the land, $120,000, and building, $280,000 before renovation. Required: 1. Apportion the cost of the property on the basis of the appraised values. (Input all amounts as positive values.) Item Apportioned cost Renovation cost Purchase cost Building Land

Answer 1

1. Cost of $180600 i.e. $178500+2100 will be apportioned between land and building as per appraised values.

	Apportioned Cost	Renovation Cost	Purchase Cost
Building	$      126,420	$        20,780	$      147,200
Land	$        54,180		$        54,180
Total	$      180,600	$        20,780	$      201,380

2.

Account Titles	Debit	Credit
Building	$    147,200
Land	$       54,180
Cash		$        201,380

3.
Depreciation = ($147200 - 14100) / 11 = $12100

4.
Carrying amount of Property at end of Year 2 = $201380 - 12100 x 2 = $177180

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