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In: Accounting

6. On January 1, 2019, Ginger Company purchased land and a building for a total cash...

6. On January 1, 2019, Ginger Company purchased land and a building for a total cash price of $6,900,000. Individually, the land was appraised at $2,250,000 and the building at $5,250,000. The buildings estimated useful life is 25 years and its estimated salvage value is $300,000. Required: a. Prepare the journal entry to record the purchase of land and building on January 1, 2019. b. What is the 2019 depreciation expense on the building, assuming that double declining-balance depreciation is used?

Solutions

Expert Solution

[1]

Date

Accounts title

Debit

Credit

01-Jan-19

Land [($6900000/7500000) x $2250000]

$2,070,000

Building [($6900000/7500000) x $5250000]

$4,830,000

   Cash

$6,900,000

(to record purchase)

[2]

A

Cost

$      4,830,000.00

B

Residual Value

$          300,000.00

C=A - B

Depreciable base

$      4,530,000.00

D

Life [in years]

25

E=C/D

Annual SLM depreciation

$          181,200.00

F=E/C

SLM Rate

4.00%

G=F x 2

DDB Rate

8.00%

Year

Beginning Book Value

Depreciation rate

Depreciation expense

Ending Book Value

Accumulated Depreciation

1

$        4,830,000.00

8.00%

$       386,400.00 = ANSWER

$       4,443,600.00

$      386,400.00

ekkarill92 answered 1 year ago
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