Check my 8 Timberly Construction negotiates a lump sum purchase of several asset

Question

Check my 8 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, 2017, at a total cash price of $900,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $508,800, land, $297,600, land improvements, $28,800, and four vehicles $124,800. The company's fiscal year ends on December 31. points Required: 1-0. 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 2017 on the building using the straight-ine method, assuming a 15-year life and a eBook Print $27,000 salvage value eterences 3. Compute the depreciation expense for year 2017 on the land improvements assuming a five-year life and double declining-balance depreciation

Explanation / Answer

Req 1A) Allocation of Total Cost Appraised Value Percentage of total appraised value X Total cost of Acquisition Apportioned Cost Building 508800 53 X 477000 31800 Land 297600 31 X 279000 18600 Land improvements 28800 3 X 27000 1800 Vehicles 124800 13 X 117000 7800 Total 960000 900000 60000 Req 1b) debit Building 477000 debit Land 279000 debit Land improvements 27000 debit Vehicles 117000 Credit Cash 900000 Req 2) Depreciation expense on building = (477000-27000)/15=$30000 Req 3) Depreciation expense on Land improvements = 27000*(20% * 2) = $10800

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