At December 31, 2017, Grand Company reported the following as plant assets. Land

Question

At December 31, 2017, Grand Company reported the following as plant assets.

Land                                                                                                                                                      4,000,000

Building                                                                                                28,500,000

Less: Accumulated depreciation – buildings                          12,100,000                          16,400,000

Equipment                                                                                          48,000,000

Less: Accumulated depreciation – equipment                     5,000,000                           43,000,000

                Total plant assets                                                                                                             63,400,000

During 2018, the following selected cash transactions occurred.

April 1   Purchased land for $2,130,000

May 1    Sold equipment that cost $75,000 when purchased on January 1, 2014. The equipment was sold                 for $450,000.

June 1   Sold land purchased on June 1, 2008 for $1,500,000. The land cost $400,000.

July 1     Purchased equipment for $2,500,000.

Dec. 31 Retired equipment that cost $500,000 when purchased on December 31, 2008. The company received no proceeds related to salvage.

Instructions:

Journalize the above transactions. The company uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 50-year life and no salvage value. The equipment is estimated to have a 10-year life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement.

Record adjusting entries for depreciation for 2018.

Prepare the plant assets section of Grand’s balance sheet at December 31, 2018.

Explanation / Answer

1. Journal entries:

2. Adjusting entries for depreciation of 2018:

3. Plant asset section of Grand's balance sheet at 12.31.2018:

Calculations for "3" can be viewed below:

Date Particulars Debit Credit 1-Apr-18 Land 2,130,000.00 Cash 2,130,000.00 1-May-18 Depreciation expense 25,000.00 Accumulated depreciation - Equipment 25,000.00 (750,000*1/10*4/12) 1-May-18 Cash 450,000.00 Accumulated depreciation - Equipment [(750000*1/10*4)+25000] 325,000.00 Equipment 750,000.00 Gain on Disposal of Plant Assets 25,000.00 1-Jun-18 Cash 1,500,000.00 Land 400,000.00 Gain on Disposal of Plant Assets 1,100,000.00 1-Jul-18 Equipment 2,500,000.00 Cash 2,500,000.00 31-Dec-18 Depreciation expense 50,000.00 Accumulated depreciation - Equipment 50,000.00 (500,000*1/10) 31-Dec-18 Accumulated depreciation - Equipment 500,000.00 Equipment 500,000.00

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