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 an $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 land is valued at $1,736,000. The company also incurs the following additional costs:
| Cost to demolish Building 1 |
$ |
328,400 |
| Cost of additional land grading |
|
175,400 |
| Cost to construct new building (Building 3), having a useful life of 25 years and a $392,000 salvage value |
|
2,202,000 |
| Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value |
|
164,000 |
| Total costs |
$ |
5,469,800
|
Allocate the costs incurred by Mitzu to the appropriate columns and total each column
Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2013.
Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2013 when these assets were in use.