Question
In January 2018, Mitzu Co. pays $2,700,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build
In January 2018, Mitzu Co. pays $2,700,000 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 $630,000, with a useful life of 20 years and a $75,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $600,000 that are expected to last another 20 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,770,000. The company also incurs the following additional costs: Cost to demolish Building 1 $ 344,400 Cost of additional land grading 187,400 Cost to construct new building (Building 3), having a useful life of 25 years and a $402,000 salvage value 2,262,000 Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value 168,000 2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2018.
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