Arial Student Name: Iris Little Due Date: November 9, 2017 1. Timberly Construct

Question

Arial Student Name: Iris Little Due Date: November 9, 2017 1. 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 2017, at a total cash price of $900,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $508,800; land, $297,600; land improvements, $28,800; and four vehicles, $124,800. The company's fiscal year ends on December 31 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 2017 on the building using the straight- line method, assuming a 15-year life and a S27.000 salvage value 3. Compute the depreciation expense for year 2017 on the land improvements assuming a five-year life and double-decl ing-balance depreciation 1-a of Appraised Percent of Total Total cost of Apportioned Total Cost Value Appraised ValueAcquisitionCcest Building

Explanation / Answer

1a) Prepare table to allocate Lumpsum amount :

1b) Journal entry TO purchase

2) Depreciation expenses on building :

Depreciation expenses = (477000-27000)/15 = 30000 per year

Five month depreciation expenses = (30000*5/12) = 12500

3) Depreciation expenses on land improvement :

straight line rate = 100/5 = 20%

double decline rate = 20*2=40%

Depreciation expenses = 27000*40%=10800

Five month depreciation expenses = 10800*5/12 = 4500

Allocation of total cost Appraised Value Percent of total appraised value Total cost of acquisition Allocated cost Building 508800 53% * 900000 477000 Land 297600 31% * 900000 279000 Land improvement 28800 3% * 900000 27000 Four vehicle 124800 13% * 900000 117000 Total 960000 900000

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