Presented below are the components related to a building that ABC Company purchased for 20,000,000 in January of 2018.

Component Useful Life Value

Building structure 50-year life 10,500,000

Building designs etc. 20-year life 6,500,000

Building fixtures 10-year life 3,000,000

Instructions

(a) Compute depreciation expense for 2018, assuming that ABC uses component depreciation and uses the straight-line method of depreciation.

Assume that the building fixtures were replaced in 5 years at a cost of 1,800,000. Prepare the entry to record the replacement of the old component with the new component.