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

Solution

Date	General Journal	Debit	Credit
Jan 1 2015	Building	$      300,000.00
	Cash		$      300,000.00
	(to record purchase of Building)
Dec 31 2015	Depreciation expense-Building	$        10,000.00
	Accumulated depreciation-Building		$        10,000.00
	(To record depreciation expense)
	Then same entry of depreciation for next 4 years too.
Dec 31 2019	Cash	$      260,000.00
	Accumulated depreciation-Building	$        50,000.00
	Gain on sale of Building		$        10,000.00
	Building		$      300,000.00
	(To record sale of Building)

Working

Straight line Method
A	Cost	$ 300,000
B	Residual Value	$ 0
C=A - B	Depreciable base	$ 300,000
D	Life [in years left ]	30
E=C/D	Annual SLM depreciation	$ 10,000

.

Depreciation schedule-Straight line method
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
2015	$ 300,000	$ 10,000	$ 10,000	$ 290,000
2016	$ 290,000	$ 10,000	$ 20,000	$ 280,000
2017	$ 280,000	$ 10,000	$ 30,000	$ 270,000
2018	$ 270,000	$ 10,000	$ 40,000	$ 260,000
2019	$ 260,000	$ 10,000	$ 50,000	$ 250,000

.

Cost	$            300,000
Accumulated depreciation	$               50,000
Book value	$            250,000
Sales price	$            260,000
Book value	$            250,000
Gain /(loss)	$               10,000