Build a new store in its place

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Reference no: EM13942517

In January 2015, Mitzu Co. pays $2,650,000 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 $600,000, 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 $510,000 that are expected to last another 17 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,890,000. The company also incurs the following additional costs:

Cost to demolish Building 1	$	338,400
Cost of additional land grading		191,400
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

Reference no: EM13942517

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