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
$644,000, with a useful life of 20 years and a $60,000 salvage value. Land Improvements 1 is valued at $420,000
and is expected to last another 12 years with no salvage value. The land is valued at $1,736,000. 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 $392,000 salvage value
Cost of new Land Improvements 2, having a 20-year useful life and no salvage value
$ 328,400
175,400
2,202,000
164,000
