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On January 1 , Mitzu Company pays a lump - sum amount of $ 2 , 6 5 0 , 0 0 0 for land,

On January 1, Mitzu Company 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 $619,500, with a useful life of 20 years and a $75,000 salvage value. Land Improvements 1 is valued at $442,500 and is expected to last another 15 years with no salvage value. The land is valued at $1,888,000. 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 Building 3, having a useful life of 25 years and a $398,000 salvage value 2,242,000
Cost of new Land Improvements 2, having a 20-year useful life and no salvage value 173,000

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