In January 2015, Bath Inc. (Bath) purchased an office building on a one hectare piece of land
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In January 2015, Bath Inc. (Bath) purchased an office building on a one hectare piece of land in Saskatoon for $6,000,000.
An appraiser valued the land at $1,375,000. The building is eight years old and Bath’s management expects it to last for another 12 years, after which time it will have to be demolished. Management has decided to use straight-line depreciation.
Required:
Prepare the journal entries that Bath would make to record the purchase of the land and building. What entry would be made to record the depreciation expense for the year ended December 31, 2015?
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