On January 1, Mitzu Co. pays a lump-sum amount of $2,750,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $690,000, with a useful life of 20 years and a $80,000 salvage value. Land Improvements 1 is valued at $450,000 and is expected to last another 15 years with no salvage value. The land is valued at $1,860,000. The company also incurs the following additional costs. Cost to demolish Building 1 $ 339,400 Cost of additional land grading 185,400 Cost to construct Building 3, having a useful life of 25 years and a $398,000 salvage value 2,202,000 Cost of new Land Improvements 2 having a 20-year useful life and no salvage value 178,000 Required: 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column. Allocation of purchase price Appraised Value Percent of Total Appraised Value x Total cost of acquisition = Apportioned Cost Land x = Building 2 x = Land Improvements 1 x = Totals $0 0% $0 Land Building 2 Building 3 Land Improvements 1 Land Improvements 2 Purchase Price Demolition Land grading New building (Construction cost) New improvements Totals $0 $0 $0 $0 $0
On January 1, Mitzu Co. pays a lump-sum amount of $2,750,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $690,000, with a useful life of 20 years and a $80,000 salvage value. Land Improvements 1 is valued at $450,000 and is expected to last another 15 years with no salvage value. The land is valued at $1,860,000. The company also incurs the following additional costs. Cost to demolish Building 1 $ 339,400 Cost of additional land grading 185,400 Cost to construct Building 3, having a useful life of 25 years and a $398,000 salvage value 2,202,000 Cost of new Land Improvements 2 having a 20-year useful life and no salvage value 178,000 Required: 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column. Allocation of purchase price Appraised Value Percent of Total Appraised Value x Total cost of acquisition = Apportioned Cost Land x = Building 2 x = Land Improvements 1 x = Totals $0 0% $0 Land Building 2 Building 3 Land Improvements 1 Land Improvements 2 Purchase Price Demolition Land grading New building (Construction cost) New improvements Totals $0 $0 $0 $0 $0
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 15PB: Urquhart Global purchases a building to house its administrative offices for $500,000. The best...
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On January 1, Mitzu Co. pays a lump-sum amount of $2,750,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $690,000, with a useful life of 20 years and a $80,000 salvage value. Land Improvements 1 is valued at $450,000 and is expected to last another 15 years with no salvage value. The land is valued at $1,860,000. The company also incurs the following additional costs.
| Cost to demolish Building 1 | $ | 339,400 | |
| Cost of additional land grading | 185,400 | ||
| Cost to construct Building 3, having a useful life of 25 years and a $398,000 salvage value |
2,202,000 | ||
| Cost of new Land Improvements 2 having a 20-year useful life and no salvage value |
178,000 | ||
Required:
1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column.
|
Expert Solution
Step 1
Given that:
Lump sum payment for Land, Buildings and for Land improvements = $27,50,000
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