On January 1, 2020, Shlamst Industries acquired a 10-acre tract of land. On the track was a warehouse that Shlamst intends to use as a distribution center, along with equipment that Shlamst intends to use in its distribution business. At the time of the purchase, the land had an appraised value of $7,300,000, the building had an appraised value of $10,625,000, and the equipment had an appraised value of $525,000. Shlamst paid $17,500,000 for the land, building, and equipment.

a. At what amounts should Shlamst record the purchase of the land, building, and equipment on January 1, 2020? Show your work.

b. Shlamst uses the straight-line method to depreciate buildings and equipment. How much depreciation expense will Shlamst report for 2020 on this building and equipment? Show your work.

$17,500,000 Purchase price Appraised values: Land Building Equipment Estimated Useful Life N/A 20 6 Estimated Salvage Value N/A $1,000,000 $15,000 $7,300,000 $10,625,000 $525,000