Question

Required information

Problem 8-3A Asset cost allocation; straight-line depreciation LO C1, P1

[The following information applies to the questions displayed below.]

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.

Cost to demolish Building 1	$	340,400
Cost of additional land grading		187,400
Cost to construct Building 3, having a useful life of 25 years and a $400,000 salvage value		2,262,000
Cost of new Land Improvements 2 having a 20-year useful life and no salvage value		178,000

Problem 8-3A Part 1

Required:

1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column.

Problem 8-3A Part 1 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 Total cost of acquisition = Apportioned Cost Land Building 2 Land Improvements 1 Totals Land Building 2 Building 3 Land Improvements 1 Land Improvements 2 Purchase Price Demolition Land grading New building (Construction cost) New improvements Totals

Answer 1

PPersent of total appraised value = (Appraised value/Total appraised value)

D E F Н 1 1 Total Cost of Allocation of Purchase Price Apportioned Cost Acquisitio n 3 Percent of Appraised Value Total Appraised Value 18,30,000 60% 7,01,500 23% 5,18,5001 17% 30,50,000 100% 26,50,000 26,50,000 26,50.000 15,90,000 6,09,500 4,50,500 26,50,000 X - 0001 4 Land 5 Building 2 6 Land Improvements 1 7 Totals 8 9 10 Purchase Price 11 Demolition 12 Land grading 13 New building (Construction cost) 14 New improvements cost 15 Totals 16 Land Building 2 15,90,000 6,09,500 3,40,400 1,87,400 Building 3 0 0 Land Improvements 1 Land Improvements 2 4,50,500 ol 0 0 0 22,62,000 0 0 21,17,800 0 6,09,500 1,78,000 1,78,000 22,62,000 4,50,500