KD Company bought a building for $71,000 cash and the land on which it is located for
Question:
Renovation costs on the building were $23,000.
Required:
1. Give the journal entry to record the purchase of the property, including all expenditures. Assume that all transactions were for cash and that all purchases occurred at the start of the year.
2. Compute straight-line depreciation at the end of one year, assuming an estimated 10-year useful life and a $15,000 estimated residual value.
3. What would be the net book value of the property (land and building) at the end of year 2?
Step by Step Answer:
Req 1 Building A 95000 Land A 109000 Cash A 204000 Building Land Cash paid 71000 107000 renovation...View the full answer
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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