Question

Chapter 08 Homework i Saved 14 Timberly Construction negotiates a lump-sum purchase of several assets from a company that is going out of business. The purchase is completed on January 1, 2018, at a total cash price of $810,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $425,500; land, $249,750; land improvements, $64,750; and four vehicles, $185,000. The company's fiscal year ends on December 31. points Required: 1-a. Prepare a table to allocate the lump-sum purchase price to the separate assets purchased. 1-b. Prepare the journal entry to record the purchase. 2. Compute the depreciation expense for year 2018 on the building using the straight-line method, assuming a 15-year life and a $29,000 salvage value. 3. Compute the depreciation expense for year 2018 on the land improvements assuming a five-year life and double-declining-balance depreciation. eBook Print Complete this question by entering your answers in the tabs below. References Reg 1A Reg 1B Reg 2 Reg 3 Prepare a table to allocate the lump-sum purchase price to the separate assets purchased. Estimated Market Value Percent of Estimated Market Value Total cost of Acquisition Apportioned Cost Allocation of total cost Building Land Land improvements Vehicles Total % x < Reg 1A Req 1B >

Answer 1

1) Allocation

Allocation of total cost	Estimated market value	Percent of estimated market value	*	Total Cost of acquisition	Apportioned cost
Building	425500	46%		810000	372600
Land	249750	27%		810000	218700
Land improvement	64750	7%		810000	56700
Four vehicle	185000	20%		810000	162000
Total	925000	100%			810000

Journal entry

Date	account and explanation	Debit	Credit
	Building	372600
	Land	218700
	Land improvement	56700
	Vehicles	162000
	Cash		810000

3) Depreciation on building = (372600-29000/15) = 22910

Depreciation on land improvement = 56700*40% = 22680