In January 2015, Mitzu Co. pays $2,700,000 for a tract of land with two building

Question

In January 2015, Mitzu Co. pays $2,700,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $810,000, with a useful life of 20 years and a $70,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $360,000 that are expected to last another 12 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,830,000. The company also incurs the following additional costs:

Allocate the costs incurred by Mitzu to the appropriate columns and total each column. (Round your percentage answers to the nearest whole number.)

2

Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2015.

3

Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2015 when these assets were in use.

Cost to demolish Building 1 $ 345,400   Cost of additional land grading 193,400   Cost to construct new building (Building 3), having a useful life
    of 25 years and a $400,000 salvage value 2,242,000   Cost of new land improvements (Land Improvements 2) near Building 2     having a 20-year useful life and no salvage value 173,000

Explanation / Answer

Solution - Lets start by Summarizing the given details in the below format

1 )

2) Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2015.

Using the above table we the details of the cost which we ave to pay - lets assume we paid in cash then below journal evtry will be passed

3) Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2015 when these assets were in use.

Depreciation under straight-line method = Cost of Asset - Salvage Value / NUmber of useful years

a Paid for Land ( Cost of Acquisition ) 2700000 b Bhilding 2 810000 c Salvage Value 70000 d Years 20 e Land Improvement 1( Near Building 1 ) 360000 f Salvage Value 0 g Years 12 h Value of Tract of Land 1830000 i Cost to demolish Building 1 345000 j Cost of additional land grading 193400 k Cost to construct new building (Building 3), 2242000 l Salvage Value 400000 m Years 25 n Additional Land improvement 2 ( building 2 ) 173000 o Salvage Value 0 p Years 20 Q Total Costs ( a+i+j+k+n) 5653400

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.