Question

Bob’s Builders purchases a building for $300,000 cash on January 1, 2015. It is expected to last 30 years (depreciation is straight-line). 5 years later on December 31, 2019 they sell the building for $260,000 cash. Record the journal entries for the purchase of the building, depreciation, and selling of the building.

Answer 1

Cost of Building = $300,000

Useful life = 30 years

Annual depreciation = Cost of building / Useful life

= 300,000/30

= $10,000

Accumulated depreciation for 5 years = 10,000 x 5

= $50,000

Book value of Building = Cost price - Accumulated depreciation

= 300,000-50,000

= $250,000

Sale price of Building = $260,000

Gain on sale of Building = Sale price of Building - Book value of Building

= 260,000-250,000

= $10,000

Journal

Date	General Journal	Debit	Credit
January 1, 2015	Building	$300,000
	Cash		$300,000
	( To record Building purchase)
December 31, 2015	Depreciation expense	$10,000
	Accumulated depreciation - Building		$10,000
	( To record depreciation expense)
December 31, 2016	Depreciation expense	$10,000
	Accumulated depreciation - Building		$10,000
	( To record depreciation expense)
December 31, 2017	Depreciation expense	$10,000
	Accumulated depreciation - Building		$10,000
	( To record depreciation expense)
December 31, 2018	Depreciation expense	$10,000
	Accumulated depreciation - Building		$10,000
	( To record depreciation expense)
December 31, 2019	Depreciation expense	$10,000
	Accumulated depreciation - Building		$10,000
	( To record depreciation expense)
December 31,2019	Cash	$260,000
	Accumulated depreciation - Building	$50,000
	Building		$300,000
	Gain on sale		$10,000
	( To record sale of Building)

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