A building costing $7,000,000 was purchased on January 1, 2020. Based on management's best estimates, the useful life of the building was estimated to be 40 years, with no residual value. During 2026 it was discovered that the local government had plans to build a freeway where the building stands. This project would require significant engineering and regulatory approval, so the site would be expropriated by January 1, 2032. The government agreed to pay $320,000 compensation for the building. The company has a December 31 year-end.
Required:
Case A: Prepare the journal entries to record depreciation for 2020 and 2026. The company uses straight-line depreciation.
Case B: Same as Case A except the company uses the double-declining balance method. The rate will be 5% until 2026 and 2/6 or 33.33% thereafter. Prepare the journal entries to record depreciation for 2020 and 2026.

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The Answer of A building costing $7,000,000 was purchased on January 1, 2020. Based on management's best estimates, the useful life of the building was estimated to be 40 years, with no residual value. During 2026 it was discovered that the local government had plans to build a freeway where the building stands. This project would require significant engineering and regulatory approval, so the site would be expropriated by January 1, 2032. The government agreed to pay $320,000 compensation for the building. The company has a December 31 year-end.
Required:
Case A: Prepare the journal entries to record depreciation for 2020 and 2026. The company uses straight-line depreciation.
Case B: Same as Case A except the company uses the double-declining balance method. The rate will be 5% until 2026 and 2/6 or 33.33% thereafter. Prepare the journal entries to record depreciation for 2020 and 2026.

A Building Costing $7,000,000 Was Purchased on January 1, 2020