Question

In January 2017, Mitzu Co. pays $2,750,000 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 $570,000, with a useful life of 20 years and a $80,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $690,000 that are expected to last another 23 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,740,000. The company also incurs the following additional costs:

Cost to demolish Building 1 . $348,400

Cost of additional land grading . 193,400

Cost to construct new building (Building 3), having a useful life of 25 years and a $402,000 salvage value .   2,262,000

Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value 173,000

Required1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column.

Assignment Print View

Allocation of purchase price

Appraised Value

Percent of Total Appraised

Value

x

Total cost of acquisition

=

Apportioned Cost

Land

x

=

Building 2

x

=

Land Improvements 1

Purchase Price

Land grading

Land

x

Building 3

=

Totals

Building 2

Land Improvements 1

Land Improvements 2

Demolition

New building (Construction cost)

New improvements

Totals

Answer 1