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

---

Definitions:

Visceral Pleurae

The visceral pleurae is a membrane that covers the lungs and dips into the spaces between the lobes, forming part of the pleural sac that aids in optimal lung function.

Parietal Pleura

The outer membrane that lines the inner surface of the chest wall and diaphragm in the thoracic cavity.

Serous Fluid

A clear, watery fluid secreted by the serous membranes, helping to lubricate and reduce friction between internal organs.

Surfactant

A substance that reduces the surface tension of fluids, often mentioned in the context of the fluid in the lungs to help them expand properly.