Question

Required information Problem 8-1A Plant asset costs; depreciation methods LO C1, P1 [The following information applies to the questions displayed below.] Timberly Construction makes a lump-sum purchase of several assets on January 1 at a total cash price of $840,000. The estimated market values of the purchased assets are building, $468,000; land, $302,250; land improvements, $29,250; and four vehicles, $175,500. Problem 8-1A Part 1-3 Required: 1-a. Allocate the lump-sum purchase price to the separate assets purchased. 1-b. Prepare the journal entry to record the purchase. 2. Compute the first-year depreciation expense on the building using the straight-line method, assuming a 15-year life and a $31,000 salvage value. 3. Compute the first-year depreciation expense on the land improvements assuming a five-year life and double-declining-balance depreciation.

Answer 1

1a
Allocation of total cost	Appraised Value	Percent of Total Appraised Value	x	Total cost of Acquisition	Apportioned Cost
Building	468,000	48%	x	840,000	403,200
Land	302,250	31%	x	840,000	260,400
Land improvements	29,250	3%	x	840,000	25,200
Vehicles	175,500	18%	x	840,000	151,200
Total	975,000	100%			840,000
b
Date	General Journal	Debit	Credit
1-Jan	Building	403,200
	Land	260,400
	Land improvements	25,200
	Vehicles	151,200
	Cash		840,000
2
Depreciation expense on building	24813	=(403200-31000)/15
3
Depreciation rate	40%	=1/5*2
Depreciation expense on land improvements	10080	=25200*40%