January 2010, Giant Green Company pays $3,000,000 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 $742,000, with a useful life of 25 years and a $75,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $400,500 that are expected to last another 18 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $2,020,600, Giant Green also incurs the following additional costs:
Cost to demolish Building 1
$ 400,200
Cost of additional land grading
200,000
Cost to construct new building (Building 3), having a useful life of 25 years and a $322,000 salvage value
3,851,000
Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value
122,000
What is the amount that should be recorded for Building #2?
Multiple Choice
$742,000
$487,921