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On January 1, Mitzu Co. pays a lump-sum amount of $2,600,000 for land, Building 1 , Building 2, and Land Improvements 1. Building 1 has no value and wi!l be demolished. Building 2 will be an office and is appraised at$644,000, with a useful life of 20 years and a $60,000 salvage value. Land improvements 1 is valued at$420,000 and is expected to last another 12 years with no salvage value. The land is valued at $1,736,000. The company also incurs the following additional costs.

Cost to demolish Building 1$ 328,400          Cost of additional land grading                      $175,400    
Cost to construct Building 3, having a useful life                     Cost of new Land Improvements 2, having a 20-year 
    of 25 years and a$392.000 salvage value           2,202,000            useful life and no salvage value                    164,000 


  1. Prepare a table with the following column headings: Land, Building 2, Building 3, Land Improvements 1, and Land Improvements 2. Allocate the costs incurred by Mitzu to the appropriate columns and total each column.

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

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


Answered 10 months ago
Answered 10 months ago
Step 1
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In this exercise, we are tasked to provide the following requirements:

  1. Allocate the lumpsum purchase price to separate assets.
  2. Journal entry for the purchase of plant asset..
  3. Determine the first-year depreciation expense on the assets used.

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