Business, 05.05.2020 06:21 sheldonwaid7958

On January 1, Mitzu Co. pays a lump-sum amount of $2,800,000 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 $823,500, with a useful life of 20 years and a $90,000 salvage value. Land Improvements 1 is valued at $457,500 and is expected to last another 15 years with no salvage value. The land is valued at $1,769,000. The company also incurs the following additional costs.

Cost to demolish Building 1 $343,400
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 2,202,000
Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value 173,000

Required:
a. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2017.
b. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2017 when these assets were in use.

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On January 1, Mitzu Co. pays a lump-sum amount of $2,800,000 for land, Building 1, Building 2, and L...

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