Question

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, 2015, at a total cash price of $800,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $458,250; land, $331,500; land improvements, $48,750; and four vehicles, $136,500. The company’s fiscal year ends on December 31.

1.1 Prepare a table to allocate the lump-sum purchase price to the separate assets purchased.

Allocation of total cost       Appraised Value    % of Total Appraised Value           x Total cost of Acquisition               Apportioned Cost

Building                                 $ %        x                                              $ $

Land %        x                                              $   

Land improvements %        x                                              $

Vehicles %        x   

Total %

*in order to get correct % calculate using appraised value total.

1.2 Prepare the journal entry to record the purchase.

Date       General Journal                    Debit                      Credit

Jan 01    Building

                Land   

                Land improvements   

                Vehicles

                Cash

2. Compute the depreciation expense for year 2015 on the building using the straight-line method, assuming a 15-year life and a $30,000 salvage value. (Round your answers to the nearest whole dollar.)

Depreciation expense on building   

3. Compute the depreciation expense for year 2015 on the land improvements assuming a five-year life and double-declining-balance depreciation.

Depreciation expense on land improvements                                +tion:

2.

Year 2015 straight-line depreciation on building

3.Year 2015 double-declining-balance depreciation on land improvements  

Answer 1