Salem Company Hired Kirk Construction to Construct an Office Building

question 118

Multiple Choice

Salem Company hired Kirk Construction to construct an office building for ₤8,000,000 on land costing ₤2,000,000, which Salem Company owned.The building was complete and ready to be used on January 1, 2011 and it has a useful life of 40 years.The price of the building included land improvements costing ₤600,000 and personal property costing ₤750,000.The useful lives of the land improvements and the personal property are 10 years and 5 years, respectively.Salem Company uses component depreciation, and the company uses straight-line depreciation for other similar assets.What is the net amount reported for the building on Salem Company's December 31, 2011 statement of financial position?

• A)₤7,665,000
• B)₤7,573,750
• C)₤6,483,750
• D)₤7,800,000

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Definitions:

Paid

A status indicating that a financial obligation or debt has been fulfilled.

Voidable

Describes a legal agreement that may be declared invalid by one of the parties due to specific conditions such as fraud, coercion, or incapacity.

Minors

Individuals who are under the age of legal competence or adulthood, typically under 18 years old.

Purchase

The act of acquiring goods or services in exchange for money or other consideration.