Calculate the cost of an asset and depreciation expense. (LO 1, 2)

Corona Company purchased land for \(\$ 75,000\) cash and a building for \(\$ 300,000\) 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 \(\$ 35,000\).

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.

a. Compute the annual straight-line depreciation, assuming a 20 -year estimated useful life and a \(\$ 10,000\) estimated salvage value for the building.

b. What would be the book value of the building at the end of the second year?

c. What would be the book value of the land at the end of the second year?