Home / Questions / In January 2013 Mitzu Co pays $ 2600000 for a tract of land with two buildings on it It pl...
In January 2013, 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 an $ 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 Required 1. Prepare a table with the following column headings: Land, Building 2, Building 3, Land Improvements 1, and Land Improvements 2. Allocate the costs incurred by Mitzu to the appropriate columns and total each column (round percents to the nearest 1%). 2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2013. 3.
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