Required information [The following information applies to the questions display

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Required information [The following information applies to the questions displayed below. In January 2017, 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 $600,000, with a useful life of 20 years and a $85,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $600,000 that are expected to last another 20 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,800,000. The company also incurs the following additional costs: Part 1 of 3 1.81 points Cost to demolish Building 1 Cost of additional land grading Cost to construct new building (Building 3), having a useful life of 25 $348,400 189,400 2,242, 000 178,000 years and a $400,000 salvage value eBook Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value Print Required 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column. References n of purchase price Appraised Total Appraised Value Total cost of Apportioned Cost acquisition Value Land Building 2 Land Improvements 1 Totals $1,800,000 600,000 600,000 $3,000,000 60%) x $. 2,700,000 | = $ 20%) x 20%! 1,620,000 540,000 540,000 2,700,000 2,700,000 2,700,000 100% Land Building 2 Building 3 Im nts 1 Im nts 2 Purchase Price Demolition Land grading New building (Construction cost) Totals

Explanation / Answer

Allocation of Purchase Price Appraised Value Percent of Total Appraised Value x Total Cost of Acquisition = Apportioned Cost Land $1,800,000 60% x $2,700,000 = $1,620,000 Building 2 600,000 20% x $2,700,000 = $540,000 Land Improvements 1 600,000 20% x $2,700,000 = $540,000 Totals $3,000,000 100% 2700000 2 Land Building 2 Building 3 Land Improvements 1 Land Improvements 2 Purchase Price $1,620,000 $540,000 $0 $540,000 $0 Demolition 348,400 0 0 0 0 Land grading 189,400 0 0 0 0 New building (Construction cost) 0 0 2,242,000 0 0 New improvements cost 0 0 0 0 178,000 Totals $2,157,800 $540,000 $2,242,000 $540,000 $178,000

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