Timberly Construction negotiates a lump-sum purchase of several assets from a co

Question

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 $820,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $497,500; land, $318,400; land improvements, $79,600; and four vehicles, $99,500. 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 $30,000 salvage value.
3. Compute the depreciation expense for year 2017 on the land improvements assuming a five-year life and double-declining-balance depreciation.

Explanation / Answer

1).

a).

b) Journal Entry :-

2). DepReciation on Building = ($410000-$30000) / 15 years

= $380000 / 15 years

= $25333.33

3). Depreciation on Land = $262400 * 5%

= $13120

Allocation of total cost Appraised value % of Total Appraised Value(A) Total cost of acquisition(B) Apportioned Cost(A*B) Building $497500 50% $820000 $410000 Land $318400 32% $820000 $262400 Land Improvements $79600 8% $820000 $65600 Vehicales $99500 10% $820000 $82000 Total $995000 100% $820000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

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