Accounting -In January 2013, Mitzu Co. pays

Accounting -In January 2013, Mitzu Co. pays

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In January 2013, Mitzu Co. pays $2,650,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $823,500, with a useful life of 20 years and an $75,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $305,000 that are expected to last another 10 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,921,500. The company also incurs the following additional costs:




  Cost to demolish Building 1
$
346,400
  Cost of additional land grading

189,400
  Cost to construct new building (Building 3), having a useful life
    of 25 years and a $402,000 salvage value

2,222,000
  Cost of new land improvements (Land Improvements 2) near Building 2     having a 20-year useful life and no salvage value

173,000
  Total costs

7,965,799  

 
Allocation   of purchase price
 
 
Appraised   value
 
 
Percent   of total appraized value
 
 
X
 
 
Total   cost of acquisition
 
 
=
 
 
Apportioned   cost
 
 
Land
 
 
 
 
 
 
x
 
 
 
 
=
 
 
 
 
Building   2
 
 
 
 
 
 
x
 
 
 
 
=
 
 
 
 
Land   improvements 1
 
 
 
 
 
 
x
 
 
 
 
=
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
  

 
 
 
Land
 
 
Building   2
 
 
Building   3
 
 
Land   Improvements 1
 
 
Land   Improvements 2
 
 
Purchase   Price
 
 
 
 
 
 
 
 
 
 
 
 
Demolition
 
 
 
 
 
 
 
 
 
 
 
 
Land   grading
 
 
 
 
 
 
 
 
 
 
 
 
New   Building (Construction cost)
 
 
 
 
 
 
 
 
 
 
 
 
New   Improvements cost
 
 
 
 
 
 
 
 
 
 
 
 
Totals
 
 
 
 
 
 
 
 
 
 
  

2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2013.
Journal Entry Worksheet
A. Record the costs of the plant assets.

Journal Entry Worksheet
 

Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2013 when these assets were in use.
A. Record the year-end adjusting entry for the depreciation expense of Building 2
B. Record the year-end adjusting entry for the depreciation expense of Building 3
C. Record the year-end adjusting entry for the depreciation expense of Land Improvements 1
D. Record the year-end adjusting entry for the depreciation expense of Land Improvements 2.