Provide the journal entries for the following transaction: Matthew built a new building to store supplies for his business. The builder charged $250,000, the electrician cost $10,000 and a painter cost 5,000. A compulsory fire safety inspection was conducted and cost $1,000. Matthew is still worried about the building burning down and has purchased 12 months insurance for $10,000 which covers the value of the building in case of destruction.

Matthew calculated that the above building cost $266,000 he estimates the building will last for 20 years and have a $50,000 salvage value. Calculate the depreciation expense for years 1, 2 and 3 using the Reducing-Balance method (use 2 times the straight line rate).

On the last day of year 3 Matthew sells the building for $200,000. Record the journal entry for the sale of the building.

When using the reducing balance method of depreciation, what do you do if the formula estimates a depreciation expense that would take the accumulated depreciation balance higher than the depreciable amount?