Salem Company Hired Kirk Construction to Construct an Office Building

Multiple Choice

Salem Company hired Kirk Construction to construct an office building for ₤9,600,000 on land costing ₤2,400,000, which Salem Company owned. The building was complete and ready to be used on January 1, 2014 and it has a useful life of 40 years. The price of the building included land improvements costing ₤720,000 and personal property costing ₤900,000. The useful lives of the land improvements and the personal property are 10 years and 5 years, respectively. Salem Company uses component depreciation, and the company uses straight-line depreciation for other similar assets. What is the net amount reported for the building on Salem Company's December 31, 2014 statement of financial position?

A) ₤9,198,000
B) ₤9,088,500
C) ₤7,780,500
D) ₤9,360,000