Information About the PPE for Jeremy Inc

Essay

Information about the PPE for Jeremy Inc. is provided below. The company held the land and building to earn rental income and appropriately applied the fair value model for the land and building. Assume that the company takes a full of depreciation each year under the straight line method.
The company decided to use the building as its new head office at the beginning of year 3.
Prepare the journal entries required to record the change in use for Year 3.
$\begin{array}{|l|l|l|l|l|} \hline & \text { Purchase Price } & \begin{array}{l}\text { Fair value at the } \\\text { end of Year 1 }\end{array} & \begin{array}{l}\text { Fair value at the } \\\text { end of Year } 2\end{array} & \begin{array}{l}\text { Fair value at the } \\\text { end of Year } 3\end{array} \\\hline \text { Land } & 10 \text { million } & 12 \text { million } & 14 \text { million } & 13 \text { million } \\\hline \text { Building }-20 \text { year } & & & & \\\text { useful life } & 40 \text { million } & 45 \text { million } & 40 \text { million } & 45 \text { million } \\\hline \begin{array}{l}\text { Machinery }-5 \text { year } \\\text { useful life }\end{array} & & 4.8 \text { million } & 3.5 \text { million } & 2.7 \text { million }\\\hline\end{array}$ .