Question
The following information applies to the questions displayed below.] In January 2018, Mitzu Co. pays $2,700,000 for a tract of land with two buildings on
The following information applies to the questions displayed below.]
In January 2018, Mitzu Co. pays $2,700,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $630,000, with a useful life of 20 years and a $75,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $600,000 that are expected to last another 20 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,770,000. The company also incurs the following additional costs:
Cost to demolish Building 1 | $ | 344,400 | |
Cost of additional land grading | 187,400 | ||
Cost to construct new building (Building 3), having a useful life of 25 years and a $402,000 salvage value | 2,262,000 | ||
Cost of new land improvements (Land Improvements 2) near Building 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.
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