Question

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 $820,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $487,550; land, $308,450; land improvements, $59,700; and four vehicles, $139,300. The company’s fiscal year ends on December 31.

1. Prepare the journal entry to record the cost of the lump-sum purchase.

2. Compute the depreciation expense for year 2013 on the building using the straight-line method, assuming a 15-year life and a $30,000 salvage value.

3. Compute the depreciation expense for year 2013 on the land improvements assuming a five-year life and double-declining-balance depreciation.

Answer 1

Here is some other information I forgot to include (well, not really information, but part of the problem that I'd already solved):

Total Appraised Value = $995,000
Total Apportioned Cost = $820,000