Questions: Required information [The following information applies to the questions displayed below.] On January 1, Mitzu Company pays a lump-sum amount of 2,600,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at 720,000 with a useful life of 20 years and a 75,000 salvage value. Land Improvements 1 is valued at 420,000 and is expected to last another 14 years with no salvage value. The land is valued at 1,860,000. The company also incurs the following additional costs. Cost to demolish Building 1 Cost of additional land grading Cost to construct Building 3, having a useful life of 25 years and a 402,000 salvage value Cost of new Land Improvements 2, having a 20-year useful life and no salvage value Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1.

To prepare a single journal entry to record all the incurred costs, we need to allocate the lump-sum payment and additional costs to the appropriate asset accounts. Here's how we can break it down:

1. Lump-Sum Payment Allocation:

   • Total lump-sum payment: $2,600,000
   • Appraised values:
     • Land: $1,860,000
     • Building 2: $720,000
     • Land Improvements 1: $420,000
   • Total appraised value: $1,860,000 + $720,000 + $420,000 = $3,000,000

   The allocation of the lump-sum payment is based on the proportion of each asset's appraised value to the total appraised value.

   • Land allocation: ($1,860,000 / $3,000,000) * $2,600,000 = $1,612,000
   • Building 2 allocation: ($720,000 / $3,000,000) * $2,600,000 = $624,000
   • Land Improvements 1 allocation: ($420,000 / $3,000,000) * $2,600,000 = $364,000

2. Additional Costs:

   • Cost to demolish Building 1: This cost is typically added to the land cost.
   • Cost of additional land grading: This cost is also added to the land cost.
   • Cost to construct Building 3: This cost is recorded as a separate asset.
   • Cost of new Land Improvements 2: This cost is recorded as a separate asset.

Assuming the additional costs are as follows (since they are not specified in the question, we'll use placeholders):

• Cost to demolish Building 1: $X
• Cost of additional land grading: $Y
• Cost to construct Building 3: $Z
• Cost of new Land Improvements 2: $W

3. Journal Entry:

plaintext Debit: Land $1,612,000 + $X + $Y Debit: Building 2 $624,000 Debit: Land Improvements 1 $364,000 Debit: Building 3 $Z Debit: Land Improvements 2 $W Credit: Cash $2,600,000 + $X + $Y + $Z + $W

This journal entry records the allocation of the lump-sum payment and additional costs to the respective asset accounts, assuming all costs are paid in cash on January 1. The placeholders $X, $Y, $Z, and $W should be replaced with the actual amounts of the additional costs.