Question
Choices Corporation purchased land, paying $150,000 cash as a down payment and signing a $100,000 note payable for the balance. Choices also had to pay
Choices Corporation purchased land, paying $150,000 cash as a down payment and signing a $100,000 note payable for the balance. Choices also had to pay delinquent property tax of $5,000, title insurance costing $3,000, and $25,000 to level the land and to remove an unwanted building. The company paid $70,000 to remove earth for the foundation and then constructed an office building at a cost of $3,750,000. It also paid $100,000 for a fence around the property, $10,500 for the company sign near the property entrance, and $18,000 for lighting of the grounds.
Required:
Determine the cost and prepare the journal entry for the company's land, land improvements, and building.
The estimated useful life of the building is 40 years and 10 years for the land improvements. No residual value. Calculate the year 1 and 2 depreciation expense using:
Straight-line
Double declining balance
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