Question: Computing and Recording a Basket Purchase and Straight-Line Depreciation Bridge City Consulting bought a building and the land on which it is located for $182,000 cash. The land is estimated to represent 70 percent of the purchase price. The company also paid renovation costs on the building of $22,000.
Required: 1. Explain how to account for the renovation costs.
2. Give the journal entry to record all expenditures. Assume that all transactions were for cash and they occurred at the start of the year.
3. Compute straight-line depreciation on the building at the end of one year, assuming an estimated 12-year useful life and a $4,600 estimated residual value.
4. What should be the book value of the land and building at the end of year 2?