Below are 3 journal entries relating to Plant Assets. (1) dr. Plant Assets 9,000
ID: 2513151 • Letter: B
Question
Below are 3 journal entries relating to Plant Assets.
(1) dr. Plant Assets 9,000 (2) dr. Cash 1,000
cr. Cash 9,000 dr. A/Depreciation 3,000
Record the purchase of assets with cash cr. Plant Asset 3,600
cr. Gain on sale 400
(3) dr. Depreciation Expense 2,400 Record sale of Plant Asset for Cash
cr. Accum. Depreciation 2,400
Record depreciation expense
Use these journal entries to post to the T accounts, Plant Assets and Accumulated Depreciation.
Traditional account approach
Plant Assets
A/Dep
110,000
52,000
115,400
51,400
What is beginning Net Plant Assets? (Plant Assets minus Accumulated Depreciation)
What is ending Net Plant Assets? (Plant Assets minus Accumulated Depreciation)
Calculate the Net Book Value of the Plant Assets sold by using the journal entry to record the gain or loss on the sale. JE (2) from above.
Credit to Plant Assets _________________
subtract Debit to Accum. Depreciation _________________
NBV of Plant Assets Sold _________600_____
Now treat the 2 accounts PP&E and Accumulated Depreciation as if they were only 1 account called Net Plant Assets. Post the same journal entries to the single account. The beginning and ending balance of Net Plant Assets should agree to b) and c) from above. Note – The labels for each item are on the left but this DOES NOT mean the item will be on the left side (debit) of the T account.
Simplified account approach
Net Plant Assets
Beg Bal
Depreciation
NBV Sold
Equip. Purchased
Notice that “depreciation expense” and “gain/loss on sale of plant assets” are items that would be reported on the income statement, while the beginning and ending balances are reported on the balance sheet. The cash paid and received for activity to these accounts is reported on the Statement of Cash Flows. Include the appropriate amounts from the JOURNAL ENTRIES to complete the section of the Statement of Cash Flows below. Note – These are the amounts that debit or credit the CASH ACCOUNT!! (highlighted)
Investing activity:
Cash paid for purchase of Plant Assets ______________
Cash received from sale of Plant Assets ______________
Net Cash used for Investing Activities $ __(8,000)
Traditional account approach
Plant Assets
A/Dep
110,000
52,000
115,400
51,400
Explanation / Answer
Beginning net plant assets = Plant assets - Accumulated depreciation = $110000 - $52000 = $58000
Ending net plant assets = Plant assets - Accumulated depreciation = $115400 - $51400 = $64000
Plant Assets Accumulated Depreciation Beg. Bal. 110000 3600 (2) (2) 3000 52000 Beg. Bal. (1) 9000 2400 (3) End. Bal. 115400 51400 End. Bal.Related Questions
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