Required information Problem 8-3A Asset cost allocation; straight-line depreciation LO C1, P1 (The following information applies…
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Question “Required information Problem 8-3A Asset cost allocation; straight-line depreciation LO C1, P1 (The following information applies…”
Required information Problem 8-3A Asset cost allocation; straight-line depreciation LO C1, P1 (The following information applies to the questions displayed below.] In January 2018, Mitzu Co. pays $2,600,000 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 $720,000, 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 $420,000 that are expected to last another 14 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: $ 341,400 187,400 Cost to demolish Building i Cost of additional land grading Cost to construct new building (Building 3), having a useful life of 25 years and a $402,000 salvage value Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value 2,262,000 178,000
3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2018 when these assets were in use. View transaction list Journal entry worksheet < 1 2 3 4 Record the year-end adjusting entry for the depreciation expense of Building Note: Enter debits before credits. Date General Journal Debit Credit Dec 31 Record entry Clear entry View general journal
Journal entry worksheet < 1 2 3 4 Record the year-end adjusting entry for the depreciation expense of Building Note: Enter debits before credits. Date General Journal Debit Credit Dec 31
Journal entry worksheet < 1 2 Record the year-end adjusting entry for the depreciation expense of Land Improvements 1. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31
Journal entry worksheet < 1 2 3 Record the year-end adjusting entry for the depreciation expense of Land Improvements 2. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31
Answer
3 | |||||||
Date | General Journal | Debit | Credit | ||||
Dec 31 | Depreciation expense–Building 2 | 27,450 | =(624000-75000)/20 | ||||
Accumulated depreciation–Building 2 | 27,450 | ||||||
Dec 31 | Depreciation expense–Building 3 | 74,400 | =(2262000-402000)/25 | ||||
Accumulated depreciation–Building 3 | 74,400 | ||||||
Dec 31 | Depreciation expense – Land improvements 1 | 26,000 | =364000/14 | ||||
Accumulated Depreciation–Land Improvements 1 | 26,000 | ||||||
Dec 31 | Depreciation expense – Land improvements 2 | 8,900 | =178000/20 | ||||
Accumulated Depreciation–Land Improvements 2 | 8,900 | ||||||
Workings: | |||||||
Allocation of Purchase Prices | Approved Value |
Percentage of Total Approved Value | x |
Total cost of Acquisition | = | Properly arranged cost | |
Land | 1,860,000 | 62% | x | 2,600,000 | = | 1,612,000 | |
Building 2 | 720,000 | 24% | x | 2,600,000 | = | 624,000 | |
Land Improvements 1 | 420,000 | 14% | x | 2,600,000 | = | 364,000 | |
Totals | 3,000,000 | 100% | 2,600,000 | ||||
Land | Building 2 | 3 | Land Improvements 1 | Land Improvements 2 | |||
Purchase price | 1,612,000 | 624,000 | 0 | 364,000 | 0 | ||
Demolition | 341,400 | 0 | 0 | 0 | 0 | ||
Grading of land | 187,400 | 0 | 0 | 0 | 0 | ||
Construction cost for a new building | 0 | 0 | 2,262,000 | 0 | 0 | ||
Cost of new improvements | 0 | 0 | 0 | 0 | 178,000 | ||
Total | 2140800 | 624000 | 2262000 | 364000 | 178000 |
Conclusion
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