{"id":11876,"date":"2021-10-28T07:20:01","date_gmt":"2021-10-28T07:20:01","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/i-plant-asset-cost-depreciation-methods-ii-asset-cost-allocation\/"},"modified":"2021-10-28T07:20:01","modified_gmt":"2021-10-28T07:20:01","slug":"i-plant-asset-cost-depreciation-methods-ii-asset-cost-allocation","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/i-plant-asset-cost-depreciation-methods-ii-asset-cost-allocation\/","title":{"rendered":"I. plant asset cost; depreciation methods ii. asset cost allocation"},"content":{"rendered":"
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I. Plant Asset Cost; depreciation methods<\/span><\/span><\/span><\/strong><\/p>\n

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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, 2013, at a total cash price of $900,000 for a building, land, land improvements and four vehicles.\u00a0\u00a0The estimated market values of the assets are building – $508,800; land – $297,600; land improvements – $28, 800 and four vehicles – $124,800. The company\u2019s fiscal year ends on December 31.<\/span><\/span><\/p>\n

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Required:<\/span><\/span><\/span><\/strong><\/p>\n

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1. Prepare a table to allocate the lump-sum purchase price to the separate assets purchased (round per cents to the nearest 1%). Prepare the journal entry to record the purchase.<\/span><\/span><\/p>\n

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2. Compute the depreciation expense for year 2013 on the building using the straight-line method, assuming a 15-year life and a $27,000 salvage value.<\/span><\/span><\/p>\n

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3. Compute the depreciation expense for year 2013 on the land improvements assuming a five-year life and double-declining-balance depreciation.<\/span><\/span><\/p>\n

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Analysis Component<\/span><\/span><\/em><\/strong><\/p>\n

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4. Defend or refute this statement: Accelerated depreciation results in payment of less taxes over the asset\u2019s life.<\/span><\/span><\/p>\n

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II. Asset Cost Allocation; straight-line-depreciation<\/span><\/span><\/span><\/strong><\/p>\n

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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 a $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 the land is valued at $1,736,000. The company also incurs the following additional cost:<\/span><\/span><\/p>\n

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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Cost to demolish Building 1\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026.\u00a0\u00a0\u00a0$\u00a0\u00a0\u00a0328,400<\/span><\/span><\/p>\n

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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Cost of additional land grading\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0175,400<\/span><\/span><\/p>\n

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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Cost to construct new building (Building 3), having a useful life<\/span><\/span><\/p>\n

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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0of 25 years and a $392,000 salvage value\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u00a0\u00a0\u00a0\u00a0\u00a02,202,000<\/span><\/span><\/p>\n

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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Cost of new land improvements (Land Improvements 2) near<\/span><\/span><\/p>\n

\u00a0<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Building 2 having a 20-year useful life and no salvage value..\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0164,000<\/span><\/span><\/p>\n

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\u00a0<\/span><\/span><\/p>\n

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Required:<\/span><\/span><\/span><\/strong><\/p>\n

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1. Prepare a table with the following column headings: Land, Building 2, Building 3, Land Improvements 1 and Land Improvements 2. Allocate the cost incurred by Mitzu to the appropriate columns and total each column (round percents to the nearest 1%).<\/span><\/span><\/p>\n

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2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2013.<\/span><\/span><\/p>\n

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3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2013when these assets were in use.<\/span><\/span><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

I. Plant Asset Cost; depreciation methods \u00a0 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, 2013, at a total cash price of $900,000 for a building, land, land improvements and four vehicles.\u00a0\u00a0The estimated market values of the assets […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":["post-11876","post","type-post","status-publish","format-standard","hentry","category-homework-help"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/11876","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=11876"}],"version-history":[{"count":0,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/11876\/revisions"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=11876"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=11876"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=11876"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}