On January 1, Mitzu Company pays a lump-sum amount of $2,700,000 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 $690,000, with a useful life of 20 years and a $80,000 salvage value. Land Improvements 1 is valued at $420,000 and is expected to last another 14 years with no salvage value. The land'is valued at $1,890,000. The company also incurs the following additional costs.

Cost to demolish Building 1

Cost of additional land grading

Cost to construct Building 3, having a useful life of 25 years and a $398,000 salvage value Cost of new Land Improvements 2, having a 20-year useful life and no salvage value

$ 339,400

195,400

2, 302,000

168, 000