Bridge City Consulting bought a building and the land on which it is located for $185,000 cash. The land is estimated to represent 60 percent of the purchase price. The company paid $15,000 for building renovations before it was ready for use. Required:
1. Prepare the journal entry to record all expenditures. Assume that all transactions were for cash and they occurred at the start of the year.
2. Compute straight-line depreciation on the building at the end of one year, assuming an estimated 10-year useful life and a $9,000 estimated residual value.
3. What should be the book value of the land and building at the end of year 2?