Question

On January 1, 2019, the accounting records of SNL included a debit balance of $15 million in the building account and a credit balance of $12 million in the related accumulated depreciation account. The building has been in use for 40 years. It was purchased for $15 million, and was estimated to have a 50-year useful life with no residual value at the date of purchase. All components of the building have the same useful life and zero residual value. SNL uses the straight-line depreciation method for all of its property, plant, and equipment. During 2019, the following expenditures relating to the building were made:

1.         The original roof of the building was removed and replaced with a new roof. The old roof cost $1 million. The new roof cost $2.5 million and is expected to have a 15-year useful life.

2.         A natural gas explosion caused $44,000 of uninsured damage to the building. This major repair did not change the estimated useful life of the building or its residual value.

SNL follows IFRS.

Required:

Prepare the journal entries to record the expenditures related to the building during 2019.

Answer 1