Presented below are the components related to an office building that Lorny Manufacturing Company purchased for $10,000,000 on January, 1, 2018.
$\begin{array}{lcr}
\text { Component } & \text { Useful Life } &\text { Value } \
\hline \text { Building structure } & 50 \text { years } & \$ 6,400,000 \
\text { Building systems } & \text { 25 years } & 2,800,000 \
\text { Building interior } & 25 \text { years } & 800,000
\end{array}$
a. Compute depreciation expense for 2018, assuming that Lorny uses component depreciation, uses the straight-line method of depreciation, and ignores scrap values.
b. Assume that the building systems (heating, plumbing, electrical) were replaced after 20 years at a cost of $2,500,000. The company paid cash. Prepare the journal entry to record the replacement of the old component with the new component.

Question

Presented below are the components related to an office building that Lorny Manufacturing Company purchased for $10,000,000 on January, 1, 2018.
$\begin{array}{lcr}
\text { Component } & \text { Useful Life } &\text { Value } \
\hline \text { Building structure } & 50 \text { years } & \$ 6,400,000 \
\text { Building systems } & \text { 25 years } & 2,800,000 \
\text { Building interior } & 25 \text { years } & 800,000
\end{array}$ 
a. Compute depreciation expense for 2018, assuming that Lorny uses component depreciation, uses the straight-line method of depreciation, and ignores scrap values.
b. Assume that the building systems (heating, plumbing, electrical) were replaced after 20 years at a cost of $2,500,000. The company paid cash. Prepare the journal entry to record the replacement of the old component with the new component.

Quizplus · Accepted Answer

The Answer of Presented below are the components related to an office building that Lorny Manufacturing Company purchased for $10,000,000 on January, 1, 2018.
$\begin{array}{lcr}
\text { Component } & \text { Useful Life } &\text { Value } \
\hline \text { Building structure } & 50 \text { years } & \$ 6,400,000 \
\text { Building systems } & \text { 25 years } & 2,800,000 \
\text { Building interior } & 25 \text { years } & 800,000
\end{array}$ 
a. Compute depreciation expense for 2018, assuming that Lorny uses component depreciation, uses the straight-line method of depreciation, and ignores scrap values.
b. Assume that the building systems (heating, plumbing, electrical) were replaced after 20 years at a cost of $2,500,000. The company paid cash. Prepare the journal entry to record the replacement of the old component with the new component.

Presented Below Are the Components Related to an Office Building