Required information

[The following information applies to the questions displayed below.] On January 1, Mitzu Co. pays a lump-sum amount of $2,750,000 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 $780,000, with a useful life of 20 years and a $85,000 salvage value. Land Improvements 1 is valued at $360,000 and is expected to last another 12 years with no salvage value. The land is valued at $1,860,000. The company also incurs the following additional costs.

Cost to demolish Building 1	$	347,400
Cost of additional land grading		195,400
Cost to construct Building 3, having a useful life of 25 years and a $398,000 salvage value		2,262,000
Cost of new Land Improvements 2 having a 20-year useful life and no salvage value		168,000

Required: 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column.

Allocation of purchase price	Appraised Value	Percent of Total Appraised Value	x	Total cost of acquisition	=	Apportioned Cost
Land			x		=
Building 2			x		=
Land Improvements 1			x		=
Totals
	Land	Building 2		Building 3		Land Improvements 1	Land Improvements 2
Purchase Price
Demolition
Land grading
New building (Construction cost)
New improvements
Totals

2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1. Record the cost of the plant assets, paid in cash.

• 1

  Record the year-end adjusting entry for the depreciation expense of Building 2.

• 2

  Record the year-end adjusting entry for the depreciation expense of Building 3.

• 3

  Record the year-end adjusting entry for the depreciation expense of Land Improvements 1.

• 4

  Record the year-end adjusting entry for the depreciation expense of Land Improvements 2.

3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the first year these assets were in use.