In January 2011, a Keona Company 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 $641,300 with a useful life of 20 years and $80,000 salvage value. A lighted parking lot near building 1 has improvements (Land Improvements) valued at $408,100 that are expected to last another 14 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,865,600. The company also incurs the following additional costs:
- Cost to demolish building 1 $422,600
- Cost of additional land grading $167,200
- Cost to construct a new building (building3), having a useful life of 25 years and a $390,000 salvage value $2,019,000
- Cost of new land improvements (Land Improvements 2) near building 2 having a 20-year useful life and no salvage value $158,000
Required
1. Prepare a table with the following column headings: Land, Building 2, Building 3, Land Improvements 1, and Land Improvements 2. Allocate the costs incurred by Keona to the appropriate columns and total each column (round percents to the nearest 1%)
2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2011
3. Using the straight line method prepare the December 31st adjusting entries to record depreciation for the 12 months of 2011 when these assets were in use.