Required information [The following information applies to the questions displayed below.] On January 1, Mitzu Company pays a lump-sum amount of $2,650,000 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 $750,000, with a useful life of 20 years and a $90,000 salvage value. Land Improvements 1 is valued at $330,000 and is expected to last another 11 years with no salvage value. The land is valued at $1,920,000. The company also incurs the following additional costs. Cost to demolish Building 1 Cost of additional land grading Cost to construct Building 3, having a useful life of 25 years and a $402,000 salvage value Cost of new Land Improvements 2, having a 20-year useful life and no salvage value $ 345,400 193,400 2,262,000 173,000 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 Total cost of acquisition Land $ 1,920,000 Building 2 Land Improvements 1 750,000 330,000 64% x 25% Totals $ 3,000,000 11% x 100% $ 2,650,000 2,650,000 2,650,000 = $ = = $ Purchase Price Demolition Land grading New building (Construction cost) New improvements Totals Land Building 2 Building 3 Apportioned Cost 1,696,000 662,500 291,500 2,650,000 Land Land Improvements 1 Improvements 2 $ 0 $ 0 $ 0 $ 0 $ 0
Required information [The following information applies to the questions displayed below.] On January 1, Mitzu Company pays a lump-sum amount of $2,650,000 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 $750,000, with a useful life of 20 years and a $90,000 salvage value. Land Improvements 1 is valued at $330,000 and is expected to last another 11 years with no salvage value. The land is valued at $1,920,000. The company also incurs the following additional costs. Cost to demolish Building 1 Cost of additional land grading Cost to construct Building 3, having a useful life of 25 years and a $402,000 salvage value Cost of new Land Improvements 2, having a 20-year useful life and no salvage value $ 345,400 193,400 2,262,000 173,000 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 Total cost of acquisition Land $ 1,920,000 Building 2 Land Improvements 1 750,000 330,000 64% x 25% Totals $ 3,000,000 11% x 100% $ 2,650,000 2,650,000 2,650,000 = $ = = $ Purchase Price Demolition Land grading New building (Construction cost) New improvements Totals Land Building 2 Building 3 Apportioned Cost 1,696,000 662,500 291,500 2,650,000 Land Land Improvements 1 Improvements 2 $ 0 $ 0 $ 0 $ 0 $ 0
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles
Section: Chapter Questions
Problem 8.8AMCP
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![Required information
[The following information applies to the questions displayed below.]
On January 1, Mitzu Company pays a lump-sum amount of $2,650,000 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 $750,000,
with a useful life of 20 years and a $90,000 salvage value. Land Improvements 1 is valued at $330,000 and is expected to
last another 11 years with no salvage value. The land is valued at $1,920,000. The company also incurs the following
additional costs.
Cost to demolish Building 1
Cost of additional land grading
Cost to construct Building 3, having a useful life of 25 years and a $402,000 salvage value
Cost of new Land Improvements 2, having a 20-year useful life and no salvage value
$ 345,400
193,400
2,262,000
173,000
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
Total cost of
acquisition
Land
$
1,920,000
Building 2
Land Improvements 1
750,000
330,000
64% x
25%
Totals
$
3,000,000
11% x
100%
$ 2,650,000
2,650,000
2,650,000
= $
=
=
$
Purchase Price
Demolition
Land grading
New building (Construction cost)
New improvements
Totals
Land
Building 2
Building 3
Apportioned Cost
1,696,000
662,500
291,500
2,650,000
Land
Land
Improvements 1 Improvements 2
$
0 $
0 $
0 $
0 $
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F16c4abb5-96d4-42fd-8e14-dfafaeeb8a75%2F53300505-64ba-4bf1-bf65-bdbf9b724482%2Fpw6soxb_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
On January 1, Mitzu Company pays a lump-sum amount of $2,650,000 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 $750,000,
with a useful life of 20 years and a $90,000 salvage value. Land Improvements 1 is valued at $330,000 and is expected to
last another 11 years with no salvage value. The land is valued at $1,920,000. The company also incurs the following
additional costs.
Cost to demolish Building 1
Cost of additional land grading
Cost to construct Building 3, having a useful life of 25 years and a $402,000 salvage value
Cost of new Land Improvements 2, having a 20-year useful life and no salvage value
$ 345,400
193,400
2,262,000
173,000
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
Total cost of
acquisition
Land
$
1,920,000
Building 2
Land Improvements 1
750,000
330,000
64% x
25%
Totals
$
3,000,000
11% x
100%
$ 2,650,000
2,650,000
2,650,000
= $
=
=
$
Purchase Price
Demolition
Land grading
New building (Construction cost)
New improvements
Totals
Land
Building 2
Building 3
Apportioned Cost
1,696,000
662,500
291,500
2,650,000
Land
Land
Improvements 1 Improvements 2
$
0 $
0 $
0 $
0 $
0
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