Required information Skip to question   [The following information applies to the questions displayed below.] On January 1, Mitzu Company pays a lump-sum amount of $2,650,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $780,000, with a useful life of 20 years and a $75,000 salvage value. Land Improvements 1 is valued at $360,000 and is expected to last another 12 years with no salvage value. The land is valued at $1,860,000. The company also incurs the following additional costs. Cost to demolish Building 1 $ 348,400 Cost of additional land grading 195,400 Cost to construct Building 3, having a useful life of 25 years and a $398,000 salvage value 2,242,000 Cost of new Land Improvements 2, having a 20-year useful life and no salvage value 168,000   Required: 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Can please get help with practice question 5.6 with a quick explaination of how?

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On January 1, Mitzu Company pays a lump-sum amount of $2,650,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $780,000, with a useful life of 20 years and a $75,000 salvage value. Land Improvements 1 is valued at $360,000 and is expected to last another 12 years with no salvage value. The land is valued at $1,860,000. The company also incurs the following additional costs.

Cost to demolish Building 1 $ 348,400
Cost of additional land grading 195,400
Cost to construct Building 3, having a useful life of 25 years and a $398,000 salvage value 2,242,000
Cost of new Land Improvements 2, having a 20-year useful life and no salvage value 168,000

 

Required:

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

Allocation of Purchase Price
Land
Building 2
Land Improvements 1
Totals
Purchase Price
Demolition
Land grading
New building (Construction cost)
New improvements
Totals
Appraised
Value
$
$
Land
0
Percent of
Total
Appraised
Value
0 $
0%
Building 2
X
X
X
X
0
Total cost of
acquisition
$
Building 3
0
$
Apportioned Cost
Land
Improvements 1
$
0
Land
Improvements 2
0 $
0
Transcribed Image Text:Allocation of Purchase Price Land Building 2 Land Improvements 1 Totals Purchase Price Demolition Land grading New building (Construction cost) New improvements Totals Appraised Value $ $ Land 0 Percent of Total Appraised Value 0 $ 0% Building 2 X X X X 0 Total cost of acquisition $ Building 3 0 $ Apportioned Cost Land Improvements 1 $ 0 Land Improvements 2 0 $ 0
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