Required informationProblem 8-3A (Static) Asset cost allocation; straight-llne depreclation LO C1, P1[The following information applies to the questions displayed below.]On January 1, Mitzu Company pays a lump-sum amount of $2,600,000 for land, Building 1, Building 2, and LandImprovements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $644,000,with a useful life of 20 years and a $60,000 salvage value. Land Improvements 1 is valued at $420,000 and is expected tolast another 12 years with no salvage value. The land is valued at $1,736,000. The company also incurs the followingadditional costs.Cost to demolish Building 1Cost of additional land gradingCost to construct Building 3, having a useful life of 25 years and a $392, 000 salvage valueCost of neW Land Improvements 2, having a 20-year useful life and no salvage value$ 328, 400175, 4002, 202, 000164, 000 Required:1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column.Percent ofAppraisedValueTotalAppraisedValueTotal Cost ofAllocation of Purchase PriceApportioned CostAcquisitionLand%3!Building 2Land Improvements 1%3DTotals240%$2410LandLandLandBuilding 2Building 3Improvements 1Improvements 2Purchase PriceDemolitionLand gradingNew building (Construction cost)New improvementsTotals24

In this question, we have to calculate straight-line depreciation.

Answered: On January 1, Mitzu Company pays a…

On January 1, Mitzu Company pays a lump-sum amount of $2,6C Improvements 1. Building 1 has no value and will be demolished.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles

Section: Chapter Questions

Problem 8.6E

See similar textbooks

Similar questions

Cost of Intangible Assets Advanced Technological Devices Inc. acquired a patent for $91,500. It spent an additional $31,250 successfully defending the patent in legal proceedings. Required: Determine the cost of the patent.
(Appendix 11.1) Auburn Company purchased an asset on January 1, Year 1, for 150,000. The asset has a MACRS life of 7 years. The residual value of the asset is 35,000. Calculate the depreciation expense for Year 1 and Year 2 using MACRS.
Allocating payments and receipts to fixed asset accounts The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale ceramic business. The receipts are identified by an asterisk. a. Fee paid to attorney for title search 2,500 b. Cost of real estate acquired as a plant site: Land 285,000 Building (to be demolished) 55,000 c. Delinquent real estate taxes on property, assumed by purchaser 15,500 d. Cost of tearing down and removing building acquired In (b) 5,000 e. Proceeds from sale of salvage materials from old building 4,000 f. Special assessment paid to city for extension of water main to the property 29,000 g. Architects and engineers fees for plans and supervision 60,000 h. Premium on one-year insurance policy during construction 6,000 i. Cost of filling and grading land 12,000 j. Money borrowed to pay building contractor 900,000 k. Cost of repairing windstorm damage during construction 5,500 1. Cost of paving parking lot to be used by customers 32,000 m. Cost of trees and shrubbery planted 11,000 n. Cost of floodlights installed on parking lot 2,000 o. Cost of repairing vandalism damage during construction 2,500 p. Proceeds from insurance company for windstorm and vandalism damage 7,500 q. Payment to building contractor for new building 800,000 r. Interest incurred on building loan during construction 34,500 s. Refund of premium on insurance policy (h) canceled after 11 months 500 Instructions 1.Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Indicate receipts by an asterisk. Identify each item by letter and list the amounts in columnar form, as follows: Item Land Land improvements Building Other Accounts 2.Determine the amount debited to Land, Land Improvements, and Building. 3.The costs assigned to the land, which is used as a plant site, will not be depreciated, while the costs assigned to land improvements will be depreciated. Explain this seemingly contradictory application of the concept of depreciation. 4.What would be the effect on the current years income statement and balance sheet if the cost of filling and grading land of 12,000 [payment (i)] was incorrectly classified as Land Improvements rather than Land? Assume that Land Improvements are depreciated over a 20-year life using the double-declining-balance method.
PARRISH 8-1 FIXED AND INTANGIBLE ASSETS-ACQUISITION OF ASSETS Please complete the following and explain the how and why of completing 1) identify the cost of the asset 2) For any costs incurred that are not included in the asset cost, specify how they would be recordedGrowth company purchaased a new mahcine for its manufacturing facility. Costs incurred in conjunction with this purchase included the following: Invoice price $90000, subject to 2/10, n/30Sales Tax $5400Freight to ship to Growth $6000Transport to factory $1900Repair of chip in machine from damage in loading $500Training of operators $3600Lunch for truck driver $25
DLW Corporation acquired and placed in service the following assets during the year: Asset Date Acquired Cost Basis Computer equipment 3/11 $ 18,000 Furniture 3/7 $ 23,500 Commercial building 9/15 $ 317,000 Assuming DLW does not elect §179 expensing and elects not to use bonus depreciation, answer the following questions: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) Problem 10-47 Part a (Algo) a. What is DLW's year 1 cost recovery for each asset?
DLW Corporation acquired and placed in service the following assets during the year: Asset Date Acquired Cost Basis Computer equipment 3/11 $ 18,000 Furniture 3/7 $ 23,500 Commercial building 9/15 $ 317,000 Assuming DLW does not elect §179 expensing and elects not to use bonus depreciation, answer the following questions: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) b. What is DLW's year 3 cost recovery for each asset if DLW sells these assets on 2/24 of year 3?
P9-1A Acquisition Cost of Long-Lived Assets The following items represent expenditures (or receipts) related to the construction of a new home office for Lowery Company. Cost of land site, which included an old apartment building appraised at $75,000 $173,000 Legal Fees, including fee for the title search 2, 100 Payment of apartment building mortgage and related interest due at time of sale 9,300 Payment for delinquent property taxes assumed by the purchaser 6,000 Cost of razing the apartment building 17,000 Proceeds from sale of salvaged materials (3,800) Grading to establish proper drainage flow on land site 2, 100 Architect’s fees on new building…
7. On January 1, 2018 an entity purchased for P4,800,000 machine with useful life of ten years on residual ofP200,000. The machine was depreciated by the double declining balance method. The entity changed to thestraight line method on January 1, 2020 and the residual value did not change. What is the accumulateddepreciation on December 31,2020?a. 2,087,000 c. 2.188,000b. 2,112,000 d. 2,015,200
E9-3 (Algo) Determining Financial Statement Effects of an Asset Acquisition and Straight-Line Depreciation [LO 9-2, LO 9-3] O’Connor Company ordered a machine on January 1 at a purchase price of $100,000. On the date of delivery, January 2, the company paid $25,000 on the machine and signed a long-term note payable for the balance. On January 3, it paid $1,000 for freight on the machine. On January 5, O’Connor paid cash for installation costs relating to the machine amounting to $6,000. On December 31 (the end of the accounting period), O’Connor recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $10,700. Required: Indicate the effects (accounts, amounts, and + for increase, − for decrease) of each transaction (on January 1, 2, 3, and 5) on the accounting equation. Compute the acquisition cost of the machine. Compute the depreciation expense to be reported for the first year. What should be…
3. On January 1, 2011, Villa Company classified as held for sale a noncurrent asset with a carrying amount of P5,000,000. On this date, the asset is expected to be sold for P4,600,000. Reasonable disposal cost to be incurred on sale is expected at P200,000. By December 31, 2011, the asset had not been sold and management after considering its options decided to place back the noncurrent asset into operations. On that date, the entity estimated that the noncurrent asset is expected to be sold at P4,300,000 with disposal cost of P50,000. The carrying amount of the noncurrent asset is P4,000,000 on December 31, 2011 if the noncurrent asset is not classified as held for sale. What is the carrying amount of the asset that should be reported in the statement of financial position on December 31, 2011? a. 5,000,000 b. 4,000,000 c. 4,400,000 d. 4,250,000