Bridge City Consulting bought a building and the land on which it is located for $195,000 cash. The land is estimated to represent 70 percent of the purchase price. The company paid $20,000 for building renovations before it was ready for use.

1. Make a journal entry. Record all expenditures for the land and buildings assuming all transactions were paid for with cash and occurred at the start of the year.

2. Compute straight-line depreciation on the building at the end of one year, assuming an estimated 10-year useful life and a $21,500 estimated residual value.

3. What should be the book value of the land and building at the end of year 2?