Vargos property plant and equipment consists of building with a cost of $800,000 and a salvage value of $40,000 with a 15-year life purchased on 06/01/13 and a piece of equipment that cost $80,000 and a salvage value of $4,000 with a 5 year life purchased on 09/01/16. Vargo incurred delivery and installation charges of $8,000 on the equipment. Vargo spent $39,000 painting the building during 2018. On 01/01/18, Vargo revised the estimate on the life of the painting the building during 2018. On 01/01/18, Vargo revised the estimate of the life of the building. Vargo now estimates that the building will be in service until 12/03/30.

On 10/01/18, Vargo exchanged the piece of equipment for a similar piece of equipment with the Eakin Company. The new equipment has salvage a salvage value of $5,000 and is expected to be taken out of service at the same time the old equipment would have been. The transaction had not commercial substance. The fair value of the equipment they gave up was $47,000. The fair value of equipment received from Eakin was $42,000. In addition to the equipment, they received $5,000 in cash. Prepare the journal entry to record the transaction on Vargos book.

Vargo considers depreciation to be an administrative expense. Compute depreciation expense for the building and equipment for 2018. Vargo computes depreciation to the nearest month and uses the 150% declining balance method for both the building and equipment.