In January 2011, Keona Co. pays $2,800,000 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 $641,300, with a useful life of 20 years and an $80,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $408,100 that are expected to last another 14 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,865,600. The company also incurs the following additional costs:
Cost to demolish Building 1 $ 422,600
Cost of additional land grading 167,200
Cost to construct new building (Building 3), having a useful life
of 25 years and a $390,100 salvage value 2,019,000
Cost of new land improvements (Land Improvements 2) near Building 2
having a 20 year useful life and no salvage value 158,000
Allocate the costs incurred by Keona to the appropriate columns and total each column. (Leave no cells blank be certain to enter “0” wherever required. Omit the “$” sign in your response.)
Land Building 2 Building 3 Landimprovements 1 Landimprovements 2
Purchase price $ $ $ $ $
Demolition
Land grading
New building
New improvements
Totals $ $ $ $ $
I NEED TO KNOW THE PURCHASE PRICE FOR LAND, BUILDING 2, AND LAND IMPROVEMENTS 1? I already know the other amounts.
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Best Answer
- JKRB answered 2 years ago
Appraised value of Assets
Land $1,865,600
Building $641,300
Land Improvements $408,100
Total appraised value = $2,915,000 at time of purchase
Cost Allocated to each asset at time of purchase
Land
(1,865,600 / 2,915,000) x 2,800,000 = $1,792,000
Building (2)
(641,300 / 2,915,000) x 2,800,000 = $616,000
Land Improvements (1)
(408,100 / 2,915,000) x 2,800,000 = $392,000
Cost to demolish Building 1 $ 422,600
Add to Land
Cost of additional land grading 167,200
Add to Land
Cost to construct new building (Building 3), having a useful life
of 25 years and a $390,100 salvage value 2,019,000
Add $2,019,000 to Building (3)
Cost of new land improvements (Land Improvements 2) near Building 2
having a 20 year useful life and no salvage value 158,000
Add to Land Improvements (2)