Top Dollar Realty purchased a building for $157,500 cash and the land for $192,500 cash. The company paid real estate closing costs of $8,000 and allocated that cost to the building and the land based on the purchase price. Renovation costs on the building were $52,500.
Use the accounting equation to record the purchase of the property, including all related expenditures. Assume that all transactions were for cash and that all purchases occurred at the beginning of the year.
1. Compute the annual straight-line depreciation, assuming a 25-year estimated useful life and a $12,600 estimated salvage value for the building.
2. What would the book value of the building be at the end of the seventh year?
3. What would the book value of the land be at the end of the thirteenth year?