Account for basket purchase. (LO 1, 2)

Premium Bottling Company purchases a building and land for a total cash price of \(\$ 200,000\). An independent appraiser provides the following market values: building\(\$ 175,000\); land-- \(\$ 75,000\).

a. How much of the purchase price should the company allocate to each of the assets?

b. If the building has a useful life of 10 years and an estimated salvage value of \(\$ 40,000\), how much depreciation expense should Premium record each year using the straight-line method?

c. Using the double-declining balance method, what would the book value of the building be at the end of 3 years?