Question

^{Chapter 8 Problems i Saved Required information Problem 8-3A Asset cost allocation; straight-line depreciation LO C1, P1 [The following information applies to the questions displayed below.) Part 2 of 3 On January 1, Mitzu Co. pays a lump-sum amount of $2,650,000 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 $701,500, with a useful life of 20 years and a $85,000 salvage value. Land Improvements 1 is valued at $518,500 and is expected to last another 17 years with no salvage value. The land is valued at $1,830,000. The company also incurs the following additional costs. points $ 340,400 187,400 eBook Cost to demolish Building 1 Cost of additional land grading Cost to construct Building 3, having a useful life of 25 years and a $400,000 salvage value Cost of new Land Improvements 2 having a 20-year useful life and no salvage value 2,262,000 178,000 Ask Print Problem 8-3A Part 2 2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1. References View transaction list View journal entry worksheet General Journal Debit Credit No 1 Date Jan 01 Land Building 2 Building 3 Land improvements 1 Land improvements 2 Cash}

Answer 1

2.

No.	Date	General Journal	Debit	Credit
1	Jan 01	Land	2117800
		Building 2	609500
		Building 3	2262000
		Land Improvements 1	450500
		Land Improvements 2	178000
		Cash		5617800
		(To record cost of plant assets paid in cash)

Working:

Allocation of purchase price	Appraised Value	Percent of Total Appraised Value	x	Total cost of acquisition	=	Apportioned cost
Land	1830000	60%	x	2650000	=	1590000
Building 2	701500	23%	x	2650000	=	609500
Land Improvements 1	518500	17%	x	2650000	=	450500
Totals	3050000	100%				2650000

	Land	Building 2		Building 3		Land Improvements 1	Land Improvements 2
Purchase price	1590000	609500				450500
Demolition	340400
Land grading	187400
New building (construction cost)				2262000
New improvements							178000
Totals	2117800	609500		2262000		450500	178000