Reference no: EM13915243

Problem 8-2A Asset cost allocation; straight-line depreciation LO C1, P1

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In January 2013, 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 an $85,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $540,000 that are expected to last another 18 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,860,000. The company also incurs the following additional costs:
Cost to demolish Building 1	$	341,400
Cost of additional land grading		195,400
Cost to construct new building (Building 3), having a useful life     of 25 years and a $400,000 salvage value		2,222,000
Cost of new land improvements (Land Improvements 2) near Building 2     having a 20-year useful life and no salvage value		173,000
Total costs		5,581,800

rev: 03_18_2015_QC_CS-11150

References

Section Break Difficulty: Hard Learning Objective: 08-P1 Compute and record depreciation using the straight-line, units-of-production, and declining balance methods.

Problem 8-2A Asset cost allocation; straight-line depreciation LO C1, P1Learning Objective: 08-C1 Explain the cost principle for computing the cost of plant assets.

2.

value:
5.00 points

Required information

Problem 8-2A Part 1

Required:
1.	Allocate the costs incurred by Mitzu to the appropriate columns and total each column.

Expanded table Difficulty: Hard Learning Objective: 08-P1 Compute and record depreciation using the straight-line, units-of-production, and declining balance methods.

Problem 8-2A Part 1Learning Objective: 08-C1 Explain the cost principle for computing the cost of plant assets.

eBook: Cost Determination eBook: Depreciation Methods

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3.

value:
5.00 points

Required information

Problem 8-2A Part 2

2.	Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2013.

Worksheet Difficulty: Hard Learning Objective: 08-P1 Compute and record depreciation using the straight-line, units-of-production, and declining balance methods.

Problem 8-2A Part 2Learning Objective: 08-C1 Explain the cost principle for computing the cost of plant assets.