Determine the carrying value of land and building

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Question - On September 1, 2020, Company purchased a parcel of land with a building on it for a combined purchase price of $3,900,000. An independent appraiser determined that the fair values of these assets to be $3,075,000 for the land, and $1,455,000 for the building. Immediately after the purchase, company spent $600,000 to replace the roof of the building. On November 1, Kensington paid $10,000 to have the exterior of the building painted. A building engineer's report indicated that the roof replacement extended the useful life of the building from 25 years to 35 years, while that paint job had no effect on the building's useful life or residual value. Kensington decided to use the straight-line method to depreciate the building and estimated that the building will have a residual value of $150,000 at the end of its useful life.

In the spaces below, determine the carrying value (i.e. net book value) of land and building as of December 31, 2020. Assume that the company occupied and started using the building on September 1, 2020.

Reference no: EM132824568

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