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 $830,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $537,300; land, $338,300; land improvements, $79,600; and four vehicles, $39,800. The company's fiscal year ends on December 31.
Required:
1.Prepare a table to allocate the lump-sum purchase price to the separate assets purchased.
2.Prepare the journal entry to record the purchase.
3.Compute the depreciation expense for year 2013 on the building using the straight-line method, assuming a 15-year life and a $31,000 salvage value.
4.Compute the depreciation expense for year 2013 on the land improvements assuming a five-year life and double-declining-balance depreciation.