In its first year of business, ChalkBoard purchased land, a building, and equipment on March 5,…

In its first year of business, ChalkBoard purchased land, a building, and equipment on March 5, 2016, for $650,000 in total. The land was valued at $275,000, the building at $343,750, and the equipment at $68,750. Additional information on the depreciable assets follows: Instructions (a) Allocate the purchase cost of the land, building, and equipment to each of the assets. (b) ChalkBoard has a December 31 fiscal year end and is trying to decide how to calculate depreciation for assets purchased during the year. Calculate depreciation expense for the building and equipment for 2016 and 2017 assuming: 1. Depreciation is calculated to the nearest month. 2. A half-year s depreciation is recorded in the year of acquisition. (c) Which policy should ChalkBoard follow in the year of acquisition: recording depreciation to the nearest month or recording a half year of depreciation? Taking It Further In the year the asset is purchased, should ChalkBoard record depreciation for the exact number of days the asset is owned? Why or why not?

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