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Determine the acquisition cost of the new building

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Question - Capitalization of Interest and Depreciation - During 2017, Mercator Company borrowed $77,000 from a local bank for the construction of a new corporate office building. Mercator used an additional $120,000 cash for the construction. Based on average accumulated expenditures, the amount of interest capitalized during 2017 was $8,000. Construction was completed, and the building was occupied on January 1, 2018.

Required -

1. Determine the acquisition cost of the new building.

2. The building has an estimated useful life of 20 years and a $5,000 salvage value. Assuming that Mercator uses the straight-line basis to depreciate its operating assets, determine the amount of depreciation expense for 2017 and 2018.

Reference no: EM133129108

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