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On January 1, Mitzu Company pays a lump-sum amount of $2,800,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no
On January 1, Mitzu Company pays a lump-sum amount of $2,800,000 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 $600,000, with a useful life of 20 years and a $70,000 salvage value. Land Improvements 1 is valued at $600,000 and is expected to last another 20 years with no salvage value. The land is valued at $1,800,000. The company also incurs the following additional costs.
Cost to demolish Building 1 | $ 343,400 |
---|---|
Cost of additional land grading | 189,400 |
Cost to construct Building 3, having a useful life of 25 years and a $400,000 salvage value | 2,222,000 |
Cost of new Land Improvements 2, having a 20-year useful life and no salvage value | 168,000 |
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