Problem 8-3A Asset cost allocation; straight-line depreciation LO C1, P1
[The following information applies to the questions
displayed below.]
In January 2017, 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 $644,000, with a useful life of 20 years and a
$60,000 salvage value. A lighted parking lot near Building 1 has
improvements (Land Improvements 1) valued at $420,000 that are
expected to last another 12 years with no salvage value. Without
the buildings and improvements, the tract of land is valued at
$1,736,000. The company also incurs the following additional
costs:
| Cost to demolish Building 1 | $ | 328,400 | |
| Cost of additional land grading | 175,400 | ||
| Cost to construct new building (Building 3), having a useful life of 25 years and a $392,000 salvage value | 2,202,000 | ||
| Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value | 164,000 | ||
Problem 8-3A Part 3
3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2017 when these assets were in use.
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