The following Information applies to the questions displayed below) In January 2
ID: 2566997 • Letter: T
Question
The following Information applies to the questions displayed below) In January 2015, 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 $540,000, 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 $540,000 that are expected to last another 18 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1.920,000. The company also incurs the following additional costs: Cost to demolish Building 1 Cost of additional land grading Cost to construct new building (Building 3), having a useful life of 25 years and a $402,000 salvage value Cost of new land improvements Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value $ 342,400 193,400 2,222,000 168,000 5.00 points Required: 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column. (Round your percentage answers to the nearest whole number.) Percent of Total Allocation of purchase price Apprais Total cost of acquisition ase price Appraised Apportioned Cost Value AppraisedX valueExplanation / Answer
Allocation of Purchase Price Appraised Value Percent of Total Appraised Value x Total Cost of Acquisition = Apportioned Cost Land 1920000 64% x 2750000 = 1760000 Building 2 5,40,000 18% x 2750000 = 495000 Land Improvements 1 5,40,000 18% x 2750000 = 495000 Totals 30,00,000 100% 27,50,000 Land Building 2 Building 3 Land Improvements 1 Land Improvements 2 Purchase Price 1760000 495000 495000 Demolition 3,42,400 Land grading 1,93,400 New building (Construction cost) 2222000 New improvements cost 168000 Totals 2295800 495000 2222000 495000 168000