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

Question

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

During 2018, the following selected cash transactions occurred.

A: 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 useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement.

B: Record adjusting entries for depreciation for 2018.

Land $ 4,320,000 Buildings $29,800,000 Less: Accumulated depreciation—buildings 10,570,000 19,230,000 Equipment 47,520,000 Less: Accumulated depreciation—equipment 4,910,000 42,610,000     Total plant assets $66,160,000

Explanation / Answer

Journal Entry in the books of Grand Company S.No. Date Account & Explanation Debit Credit Part-A 01/04/2018 Land $2,000,000 Cash $2,000,000 To Record Purchase of Land 01/05/2018 Depreciation $28,000 Accumulated Depreciation -Equipment $28,000 ($840000/10*4/12) To Record Depreciaiton upto the date of Sale 01/05/2018 Cash $504,000 Accumulated Depreciation ($336000+$28000) $364,000 Equipment $840,000 Gain on sale of Investment $28,000 To Record deprecition upto the date of Sale 01/06/2018 Cash $1,430,000 Land $393,000 Gain on sale of Land $1,037,000 To record sale of Land 01/07/2018 Equipment $2,440,000 Cash $2,440,000 To record Purchase of Equipment 31/12/2018 Depriciation ($480000/10) $48,000 Accumulated Depreciation-Equipment $48,000 To Record depreciation for the year 2018 on retired Equipment 31/12/2018 Accumulated Depreciation-Equipment $480,000 Equipment $480,000 To record retirement of Equipment Part-B 31/12/2018 Depreciation $596,000 Accumulated Depreciation-Building $596,000 To Record Depreciaiton on Building for 2018 Depriciation $4,742,000 Accumulated Depreciation-Equipment $4,742,000 To Record depreciation for the year 2015 ($47520000-$840000-$480000)*1/10+$2440000/10*6/12

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