Question

Exercise 10-24 (Part Level Submission) Sandhill Corporation owns and manages a small 10-store shopping centre, which it classifies as an investment property. Sand hill has a May 31 year end and initially recognized the property at its acquisition cost of $10.7 million on June 2, 2019. The acquisition cost consisted of the purchase price of $10 million, costs to survey and transfer the property of $475,000, and legal fees to acquire the property of $225,000. Sand hill determines that approximately 28% of the shopping centre's value is attributable to the land, with the remainder attributable to the building. The following fair values are determined: Date Fair Value $10,470,000 May 31, 2020 $10,363,000 May 31, 2021 May 31, 2022 $10,972,000 Sandhill expects the shopping centre building to have a 35-year useful life and a residual value of $0.984 million. Sandhill uses the straight-line method for depreciation (a) Your answer is partially correct. Try again Assume that Sandhill decides to apply the cost model. What journal entries, if any, are required each year? (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.) Account Titles and Explanation Debit Date Credit May 31, 2020 Depreciation Expense 271,028 277,600 Accumulated Depreciation Buildings May 31, 2021 Depreciation Expense 285,764

Answer 1

solution . 2996000 Coast of Land ( 28% of 10.7 millon) Cost of Building (10.7 million – 2.996 million) 5704000 Sandhill Corporation uses cost model. so there is no use of fair value given in question. Secondly, Depreciation would be calculated only value of Building. No depreciation would be calculated for value of Land. using slm method Depreciation, could e calculated ща е : 35 үсам, Residual value : as40000 So depreciation/year = 7704000 - 984000. /35 192000

Journal entrier: Date Particularz Debit Gredet May 31, 2020 Depreciation expense 192000 192000 Accumulated Depreciation - Shopping center bollding | [ Depreciation at end of years] 2020 Depreciation experse 192000 192000 Accumulated Depreciation - Shopping centre building [ Depreciation at end of Year 2] May 31, 2021 | 192000 192000 Depreciation expense Accumulated depreciation - shopping centre beldeng i [ Depreciation at end of year 3]