In January 2013, Mitzu 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 $570,000, with a useful life of 20 years and an $90,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $600,000 that are expected to last another 20 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,830,000. The company also incurs the following additional costs:
|
|
|
| Cost to demolish Building 1 |
$ |
347,400 |
| Cost of additional land grading |
|
185,400 |
Cost to construct new building (Building 3), having a useful life
of 25 years and a $402,000 salvage value |
|
2,262,000 |
| Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value |
|
173,000 |
| Total costs |
|
8,007,799
|
| . |