timberly construction makes a lump-sum purchase of several assets on january 1 at a total cash price of $840,000. the estimated market values of the purchased assets are building, $467,500; land, $289,850; land improvements, $37,400; and four vehicles, $140,250. problem 8-1a (algo) part 1-3 required: 1-a. allocate the lump-sum purchase price to the separate assets purchased. 1-b. prepare the journal entry to record the purchase. 2. compute the first-year depreciation expense on the building using the straight-line method, assuming a 15-year life and a $32,000 salvage value. 3. compute the first-year depreciation expense on the land improvements assuming a five-year life and double-declining-balance depreciation.

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pragyavermav1 pragyavermav1 · Answer 1 · 2022-11-20T19:18:11+01:00

1. a. Allocate the lump-sum purchase price to the separate assets purchased.

Calculation of Percent of Total Appraised Value

Building= $439300*100/955000= 46%

Land= $286500*100/955000= 30%

Land improvements= $28650*100/955000= 3%

Vehicles= $200550*100/955000= 21%

2. Prepare the journal entry to record the purchase.

Date General Journal Debit Credit

Jan 01 Building $381800

Land $249000

Land improvements $24900

Vehicles $174300

Cash $830000

(To record the cost of lump-sum purchase)

Compute the first-year depreciation expense on the building using the straight-line method, assuming a 15-year life and a $29000 salvage value.

Depreciation expense= (Cost-Salvage value)/Number of useful life

= $(381800-29000)/15= $23520

Depreciation expense on building $23520

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

Depreciation rate= 100/5*2= 40%

Depreciation expense= $24900*40%= $9960

Depreciation expense on land improvements $9960

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