Timberly Construction negotiates a lump-sum purchase of several
assets from a company that is going out of business. The purchase
is completed on January 1, 2018, at a total cash price of $840,000
for a building, land, land improvements, and four vehicles. The
estimated market values of the assets are building, $487,550; land,
$298,500; land improvements, $69,650; and four vehicles, $139,300.
The company’s fiscal year ends on December 31.
Required:
1-a. Prepare a table to allocate the lump-sum
purchase price to the separate assets purchased.
1-b. Prepare the journal entry to record the
purchase.
2. Compute the depreciation expense for year 2018
on the building using the straight-line method, assuming a 15-year
life and a $30,000 salvage value.
3. Compute the depreciation expense for year 2018
on the land improvements assuming a five-year life and
double-declining-balance depreciation.
Req 1A. Prepare a table to allocate the lump-sum purchase price
to the separate assets purchased.
| Allocation of total cost |
Estimated Market Value |
Percent of Estimated Market Value |
Total cost of Acquisition |
Apportioned Cost |
| Building |
$ |
% |
$ |
|
| Land |
|
|
|
|
| Land improvements |
|
|
|
|
| Vehicles |
|
|
|
|
| Total |
$ |
|
|
$ |
Req 1b. Prepare the journal entry to record the purchase.
| Date |
General Journal |
Debit |
Credit |
| Jan 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Req 2. Compute the depreciation expense for year 2018 on the
building using the straight-line method, assuming a 15-year life
and a $30,000 salvage value. (Round your answer to the nearest
whole dollar.
| Depreciation expense on building |
$ |
Req 3. Compute the depreciation expense for year 2018 on the
land improvements assuming a five-year life and
double-declining-balance depreciation.
| Depreciation expense on land improvements |
$ |