Land $ 5,076,000 Buildings $35,850,000 Less: Accumulated depreciation—buildings

Question

Land                                                                                                $ 5,076,000
Buildings                                                             $35,850,000
Less: Accumulated depreciation—buildings        20,177,100         15,672,900
Equipment                                                            67,680,000
Less: Accumulated depreciation—equipment        8,460,000
                                                                                                        59,220,000
Total plant assets                                                                            $79,968,900

During 2015, the following selected cash transactions occurred.

Apr.    1       Purchased land for $3,722,400.
May    1       Sold equipment that cost $1,015,200 when purchased on January 1, 2008. The equipment was sold for $287,640.
June    1       Sold land for $2,707,200. The land cost $1,692,000.
July    1       Purchased equipment for $1,861,200.
Dec.    31       Retired equipment that cost $1,184,400 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 entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Record adjusting entries for depreciation for 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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.) (List Plant Assets in order of Land, Building and Equipment.)

Explanation / Answer

DR CR Apr. 1 Land 37,22,400 Cash 37,22,400 May-01 Depreciation Expense--Equipmen 33840 Accumulated Depreciation--Equipment 33840 101522/10*4/12=33840 May-01 Cash 287640 Accumulated Depreciation--Equipment =101522/10*7 +33840 744480 Equipment 1015200 Gain on Sale 16920 Jun-01 Cash 2707200 Land 1692000 Gain on Sale 1015200 Jul-01 Equipment 1861200 Cash 1861200 Dec. 31 Depreciation Expense--Equipment =1184400/10 118440 Accumulated Depreciation 118440 Dec. 31 Accumulated Depreciation--Equipment 1184400 Equipment 1184400 The equipment has been held for 10 years, so it is fully depreciated.

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