A Building Costing $7,000,000 Was Purchased on January 1, 2020

question 14

Essay

A building costing $7,000,000 was purchased on January 1, 2020. Based on management's best estimates, the useful life of the building was estimated to be 40 years, with no residual value. During 2026 it was discovered that the local government had plans to build a freeway where the building stands. This project would require significant engineering and regulatory approval, so the site would be expropriated by January 1, 2032. The government agreed to pay $320,000 compensation for the building. The company has a December 31 year-end.
Required:
Case A: Prepare the journal entries to record depreciation for 2020 and 2026. The company uses straight-line depreciation.
Case B: Same as Case A except the company uses the double-declining balance method. The rate will be 5% until 2026 and 2/6 or 33.33% thereafter. Prepare the journal entries to record depreciation for 2020 and 2026.

Grasp the statistical significance and implications of model coefficients, including main and interaction effects.

Evaluate model fit and choose between models based on statistical measures and diagnostic plots.

Demonstrate knowledge of the computational elements of regression analysis, including the derivation of regression lines.

Interpret diagnostic plots to identify potential issues in regression analysis.

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Definitions:

Delegation

A contracting party’s (a delegator’s) transfer of his or her duty to perform to a third party who is not part of the original contract (a delegatee).

Parol Evidence Rule

A common law rule that states that oral evidence of an agreement made prior to or contemporaneously with a written agreement is inadmissible when the parties intend the written agreement to be the complete and final version of their agreement.

Parol

Relating to or given by word of mouth; not in writing or formalized in documents.

Parol Evidence Rule

A rule in contract law that prevents parties from presenting evidence of prior or contemporaneous agreements that would contradict the written terms of the contract.