At December 31, 2014, Navaro Corporation reported the following plant assets. La
ID: 2488578 • Letter: A
Question
At December 31, 2014, Navaro Corporation reported the following plant assets.
Land $ 5,109,000 Buildings $26,740,000 Less: Accumulated depreciation—buildings 20,308,275 6,431,725 Equipment 68,120,000 Less: Accumulated depreciation—equipment 8,515,000 59,605,000 Total plant assets $71,145,725 During 2015, the following selected cash transactions occurred. Apr. 1 Purchased land for $3,746,600. May 1 Sold equipment that cost $1,021,800 when purchased on January 1, 2008. The equipment was sold for $289,510. June 1 Sold land for $2,724,800. The land cost $1,703,000. July 1 Purchased equipment for $1,873,300. Dec. 31 Retired equipment that cost $1,192,100 when purchased on December 31, 2005. No salvage value was received.
Journalize the transactions. Navaro uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 40-year useful life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value.
Update depreciation on assets disposed of at the time of sale or retirement. Record adjusting entries for depreciation for 2015.
Prepare the plant assets section of Navaro’s balance sheet at December 31, 2015. (Hint: You may wish to set up T accounts, post beginning balances, and then post 2015 transactions.)
Explanation / Answer
Journal entry
Date
Account
Debit
Credit
April
Land
3,746,600
To Cash
3,746,600
Depreciation expense
To Accumulated depreciation
(25,545*4/12)
8515
8515
May 1
Cash
$289,510
Accumulated depreciation
(1,021,800/10)6 +25545*4/12)
647,140
Loss on sale
85,150
To Equipment
$1,021,800
June 1
Cash
$2,724,800.
To Land
$1,703,000
To Gain on sale
1,021,8000
July 1
Equipment
$1,873,300
To Cash
$1,873,300
Depreciation expense
To accumulated derpeciation
1,072,890
1,072,890
Dec 31
Accumulate depreciation
(1,192,100/10)*9
1,072,890
Loss on disposal
119,210
To Equipment
1,192,100
Adjusting entries for depreciation
Building 26,740,000/40 = 668,500 depreciation for the year
Equipment
68,120,000 -$1,021,800 sold = 67,098,200 – 1,192,100 =65,906,100
Depreciation = 65,906,100/10 = 6,590,610
Depreciation on equipment purchased on july 1 for 1,873,300=187,330
Adjusting entry
Depreciation expense
668,500
To Accumulated depreciation - building
668,500
Depreciation expense
6,777,940
To accumulated depreciation - Equipment
6,777,940
Balance sheet
Land 7,152,600
Building 26,740,000
Less: Accumulated depreciation (20,976,775) 5,763,225
Date
Account
Debit
Credit
April
Land
3,746,600
To Cash
3,746,600
Depreciation expense
To Accumulated depreciation
(25,545*4/12)
8515
8515
May 1
Cash
$289,510
Accumulated depreciation
(1,021,800/10)6 +25545*4/12)
647,140
Loss on sale
85,150
To Equipment
$1,021,800
June 1
Cash
$2,724,800.
To Land
$1,703,000
To Gain on sale
1,021,8000
July 1
Equipment
$1,873,300
To Cash
$1,873,300
Depreciation expense
To accumulated derpeciation
1,072,890
1,072,890
Dec 31
Accumulate depreciation
(1,192,100/10)*9
1,072,890
Loss on disposal
119,210
To Equipment
1,192,100
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