Do you calculate depreciation?
Hello, I hope someone can help me if my solution is correct? LG
1. Entrepreneur A. acquired a commercial property for €300,000 on October 2, 2018.
Of this, €40,000 was allocated to the purchase price of the land.
Additional acquisition costs totaled €12,000. The building was completed in 1923.
a. Please book the purchase transaction.
b. Determine the depreciation for the years 2018 and 2019
Solution
a. Booking the acquisition transaction:
Property:
Property (asset account) €40,000
Bank (liability account) €40,000
Building:
Building (asset account) €260,000
Bank (liability account) €260,000
Additional acquisition costs:
Acquisition costs (asset account) €12,000
Bank (liability account) €12,000
b. Determination of depreciation for the years 2018 and 2019:
Depreciation is calculated based on the value of the building, as the land is not subject to wear and tear.
Building value: €260,000
Useful life for buildings: As a rule, the useful life of a building in Germany is 50 years.
Depreciation per year: Building value / useful life = €260,000 / 50 years = €5,200 per year
For the year 2018, the depreciation is therefore: €5,200
For the year 2019, the depreciation is also: €5,200
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The active account of acquisition costs is not available. Instead, the costs must be divided.
But what do you want me to split the costs? Unfortunately, in the task, more information has been missing in this regard.
40:260
All secondary costs necessary to make the object operational must be activated and thus also increase the purchase costs.
I would have done that.