Question

Tan Chin Company purchases a building for $11,300,000 on January 2, 2020. An engineer’s report shows that of the total purchase price, $11,000,000 should be allocated to the building (with a 40-year life), $150,000 to 15-year property, and $150,000 to 5-year property. No residual (salvage) value should be considered. Compute depreciation expense for 2020 using component depreciation.

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