Reference no: EM131752344
In January 2015, Mitzu Co. pays $2,800,000 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 $750,000, with a useful life of 20 years and a $80,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $360,000 that are expected to last another 12 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 $ 341,400
Cost of additional land grading 187,400
Cost to construct new building (Building 3), having a useful life of 25 years and a $398,000 salvage value 2,242,000
Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value 168,000