5 Presented below are the components related to an office building that Lockard Company is considering purchasing for 10,000,000.

Component Useful Life Value

Building structure 60-year life 5,400,000

Building engineering 30-year life 2,400,000

Building external works 30-year life 900,000

Instructions

(A) Compute depreciation expense for 2010, assuming that Lockard uses component depreciation. [1 point]

(B) Assume that the building engineering was replaced in 20 years at a cost of 2,600,000. Prepare the entry to record the replacement of the old component with the new component. [1 point]