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In January 2013, 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 $854,000, with a useful life of 20 years and an $85,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $335,500 that are expected to last another 11 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,860,500. The company also incurs the following additional costs:

Cost to demolish Building 1$344,400

Cost of additional land grading 189,400

Cost to construct new building (Building 3), having a useful life

of 25 years and a $402,000 salvage value 2,302,000

Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value 168,000

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

2Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2013.

3

Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2013 when these assets were in use.