XYZ leased a tract of land for a 20-year term.The lease agreement did not contain a bargain purchase option, and consequently, the land will revert back to the lessor at the end of the lease term.At the inception of the lease, XYZ initiated construction on a small building on the land.The building was completed at the end of the third year of the lease, at a cost of $60,000.The building was a permanent structure on the land.Its estimated life was 20 years and was expected to have no residual value.XYZ should record annual depreciation (straight-line)on the building of:

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The Answer of XYZ leased a tract of land for a 20-year term.The lease agreement did not contain a bargain purchase option, and consequently, the land will revert back to the lessor at the end of the lease term.At the inception of the lease, XYZ initiated construction on a small building on the land.The building was completed at the end of the third year of the lease, at a cost of $60,000.The building was a permanent structure on the land.Its estimated life was 20 years and was expected to have no residual value.XYZ should record annual depreciation (straight-line)on the building of:

XYZ Leased a Tract of Land for a 20-Year Term