Answer:
Bridge City Consulting
1. Journal Entries:
January 1:
Debit Land (60%) $111,000
Debit Building (40%) $74,000
Credit Cash $185,000
To record the purchase of land and building for cash.
Debit Building $15,000
Credit Cash $15,000
To record the cost of renovating the building for use.
2. Depreciation on the building at the end of one year = $8,000.
3. Book value of Land = $111,000
Book value of Building = $89,000
Explanation:
a) Data and Calculations:
Building and land = $185,000
Land (60%) $111,000 Building (40%) $74,000 Cash $185,000
Building $15,000 Cash $15,000
Straight-line Depreciation on Building:
Cost of Building $89,000
Estimated useful life = 10 years
Estimated residual value = $9,000
Depreciable amount = $80,000 ($89,000 - $9,000)
Annual Depreciation Expense = $8,000 ($80,000/10)
b) The book value is different from the net book value. The net book value of the building at the end of year 2 would be $73,000 (Book value, $89,000 less Accumulated Depreciation, $16,000). It includes the residual value and the undepreciated portion of the asset.
