University Of Texas At Austin Operations And Supply Chain Management Assignment Help - Depreciation

Question - In January 2013, 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 $600,000, with a useful life of 20 years and an $80,000 salvage value. A lighted parking
lot near Building 1 has improvements (Land Improvements 1) valued at $630,000 that are expected to
last another 21 years with no salvage value. W ithout the buildings and improvements, the tract of land
is valued at $1,770,000. The company also incurs the following additional costs:
Cost to demolish Building 1 $347,400
Cost of additional land grading 187,400
Cost to construct new building (Building 3), having a useful life of 25 years a ...Read More nd a $402,000 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 178,000
1. 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column.
Allocation of
purchase price
Appraised
value
Percent of total
appraized value X Total cost of
acquisition = Apportioned
cost
Land x =
Building 2 x =
Land improvements
1 x =
Total
Land Building
2
Building
3
Land Improvements
1
Land Improvements
2
Purchase Price
Demolition
Land grading
New Building (Construction
cost)
New Improvements cost
Totals
1. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on
January 1, 2013.
a. Record the costs of the plant assets.


2. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation
for the 12 months of 2013 when these assets were in use.
a. Record the costs of the plant assets.
b. Record the year-end adjusting entry for the depreciation expense of Building 3
c. Record the year-end adjusting entry for the depreciation expense of Land Improvements 1.

d. Record the year-end adjusting entry for the depreciation expense of Land Improvements 2 ...Read Less

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