On March 31, 2017 Delhon Industries purchased a new property for $2,500,000 cash. Before

completing the purchase, Delhon had obtained valuations to determine the relative value of the

different components of the property purchased.

The valuation indicated that the fair value of the land, if purchased separately, would be

$375,000, the building's value is $1,900,000, the manufacturing equipment $192,500, and the

office and computer equipment $55,000. In addition to the land, building and equipment, the

purchase price includes inventory with a net realizable value of $27,500.

The anticipated life of the building is 25 years, the manufacturing equipment 10 years, and the

office and computer equipment 5 years, with no residual value for any of them. Delhon has a

December 31 year end.

Instructions

a. Calculate cost of each asset included in purchase of the new property.

b. Record the purchase on March 31, 2017.

c. Record the depreciation expense for 2017 using the straight-line method assuming the

company chooses to prorate depreciation based on the number of months the asset has

been in use.