Dior Company purchased an 8-floor building as an investment on January 3, 2016 for $2,000,000 cash....

Dior Company purchased an 8-floor building as an investment on January 3, 2016 for $2,000,000 cash. The building is intended to earn rentals and for capital appreciation in the future. In addition to the purchase price, the company also paid $90,000 legal fees for acquisition of property, $10,000 taxes for title transfer and $30,000 to paint the whole building. On the date of acquisition, all eight floors were leased and the company received $150,000 for tenant deposits obligations.

Based on independent appraisal, land accounted for approximately 40% of the value of the property. In valuing the property, it was also determined that the fair value of the elevator in its present condition is $180,000. The elevator is expected to have a useful life of 10 years, zero residual value and it will have to be replaced at the end of the useful life. The building is expected to have a useful life of 20 years and a residual value of $260,000.

Assume the company uses the fair value model, prepare the journal entry to record the acquisition of the property on January 3, 2016. The purchase was made in cash.

Expert Solution

ekkarill92 answered 2 years ago

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