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.

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

On 1/1/2016 KTA Inc. purchased a building at a cost of $2,000,000. The building had an...

On 1/1/2016 KTA Inc. purchased a building at a cost of $2,000,000. The building had an estimated useful life of 25 years; a residual value of 400,000 and is depreciated on a straight line basis. On January 1, 2017 the building was determined to have a fair value of $2,200,000. There is no change in useful life or residual value. What depreciation expense would KTA Inc. record under G.A.A.P in 2017? What revaluation gain would KTA Inc. record under IFRS....

On April 3, 2020, Terry purchased and placed in service a building that cost $2,000,000. An...

On April 3, 2020, Terry purchased and placed in service a building that cost $2,000,000. An appraisal determined that 25% of the total cost was attributed to the value of the land. The bottom floor of the building is leased to a retail business for $32,000. The other floors of the building are rental apartments with an annual rent of $160,000. If required, round your answers to the nearest dollar. Click here to access the depreciation table to use for...

On April 3, 2017, Terry purchased and placed in service a building that cost $2,000,000. An...

On April 3, 2017, Terry purchased and placed in service a building that cost $2,000,000. An appraisal determined that 25% of the total cost was attributed to the value of the land. The bottom floor of the building is leased to a retail business for $32,000. The other floors of the building are rental apartments with an annual rent of $160,000. If required, round your answers to the nearest dollar. Click here to access the depreciation table to use for...

Question 18 On January 1, 2016, Melissa Company purchased a building and machinery that have the...

Question 18 On January 1, 2016, Melissa Company purchased a building and machinery that have the following useful lives, salvage value, and costs. Building, 25-year estimated useful life, $8,650,000 cost, $865,000 salvage value Machinery, 10-year estimated useful life, $1,430,000 cost, no salvage value The building has been depreciated under the straight-line method through 2020. In 2021, the company decided to switch to the double-declining balance method of depreciation for the building. Melissa also decided to change the total useful life...

On October 1, 2019, Sobriety Company purchased a building for $2,000,000 to open a bar there,...

On October 1, 2019, Sobriety Company purchased a building for $2,000,000 to open a bar there, expecting to use it for fifteen years. Sobriety uses straight-line method to depreciate the building and estimates its residual value at $650,000. On August 1, 2022, Sobriety sold the building for $1,800,000. What is the gain or loss from the disposal? Identify whether it is gain or loss, and the amount. For example, the answer is $100,000 gain, then write down "$100,000 gain."

On 1st January, 2016, a building materials manufacturing company in Oman purchased a farm land from...

On 1st January, 2016, a building materials manufacturing company in Oman purchased a farm land from the outskirts of Al Dhakliyah region. The cost of the property was OMR 675,000 and the company has made the settlement in full. The property tax of OMR 36,000 was due from the previous owner of the farm was paid by the company. All the legal costs relating to the acquisition of land was OMR 5,400. The old building in the farm land was...

Glitz hotel is going to make a $2,000,000 investment by completing renovating a floor of the...

Glitz hotel is going to make a $2,000,000 investment by completing renovating a floor of the hotel. The floorplan will be entirely redone, and they can have a mix of three types of rooms: Luxury Suites, Large rooms, or Regular rooms. Due the size of the floor, they can build a maximum of 20 luxury suites or a maximum of 40 large rooms or a maximum of 60 regular rooms or a mix of all three. Luxury suites will rent...

January 1, 2016 SOS company invested 2,000,000 $ for 80% of RAT company, in that date...

January 1, 2016 SOS company invested 2,000,000 $ for 80% of RAT company, in that date the fair value of RAT is equal to its book value except inventories was undervalued 40,000, equipment ( 5 years ) undervalued 60,000 ,6% 10 years bonds overvalued 30,000 and unrecorded patent 80,000 estimated 20 years’ useful life. The owner’s equity was $1,200,000 shares, 600,000 premiums and 400,000 as retained earnings, the following are selective information about the parent and its subsidiary: 1- The...

6. On January 1, 2019, Ginger Company purchased land and a building for a total cash...

6. On January 1, 2019, Ginger Company purchased land and a building for a total cash price of $6,900,000. Individually, the land was appraised at $2,250,000 and the building at $5,250,000. The buildings estimated useful life is 25 years and its estimated salvage value is $300,000. Required: a. Prepare the journal entry to record the purchase of land and building on January 1, 2019. b. What is the 2019 depreciation expense on the building, assuming that double declining-balance depreciation is...

On January 8 of year 1 Javier purchased a building, including the land it was on,...

On January 8 of year 1 Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,399,500; $322,000 was allocated to the basis of the land and the remaining $1,077,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) d. Answer the...

Subjects