Capital expenditures, depreciation, and disposal merton company purchased a building on january 1, 2016, at a cost of $364,000. merton estimated that its life would be 25 years and its residual value would be $14,000 on january 1, 2017, the company made several expenditures related to the bui ing. the entire bulding was parted and mors were etished at ? oost of s21,000. a federal agency rea red m to to i stat additional pollution control devices in the building at a cost of s42,000, with the new devies, merton beleved k wai pombe to etend the-ot the butting by in 2018, merton altered its corporate strategy dramatically. the company sold the building on april 1, 2018, for $392,000 in cash and relocated all operetions to another state.
1. determine the depreciation that should be on the income statement for 2016 and 2017, 1614,000 2017 2. explain why the cost of the pollution control equipment was not expensed in 2017
a. the asset was capitalized because it provided a current year tax advantage.
b. since the pollution control equipment has an unknown life, the asset was capitalized.
c since the pollution control equipment extended the lide of the asset, the asset was capitalized.
d. extending the life of the asset makes no difference on whether to expense or capitalixre, so the company chose to capitalize ifor lower taxes in the ourrent year c v 3.
what amount of gain or loss did merton record when it sold the building? do not round intermed ate calculations what amount of gain or loss would have been reported if the pollution control equipment had been expensed in 2017? 59,500 | gain v'