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: Prepare the plant assets section of Grand’s balance sheet at December 31, 2018. (List Plant Assets in order of Land, Buildings and Equipment.)

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

A.

B.

Grand Company Journal entries for the year 2018 Date Account Title Debit Credit April.1 Land 2000000 Cash 2000000 (Purchase of land ) May.1 Depreciation Expense 28000 Accumulated Depreciation - Equipment 28000 (Depreciation expense on the equipment sold) May.1 Cash 504000 Accumulated Depreciation - Equipment 364000 Equipment 840000 Gain on sale of equipment 48000 (Sale of equipment purchased in 2014 ) June.1 Cash 1430000 Land 393000 Gain on sale of land 1037000 (Sale of land costing ) Dec.31 Depreciation Expense 5264000 Accumulated Depreciation - Equipment 4668000 Accumulated Depreciation - Building 596000 (Depreciation expense for the year recorded) Working: 1. Equipment sold on May.1 Cost 840000 Estimated life - years 10 Annual depreciation 84000 Depreciation for the years 2014 to 2017 (4 years) 336000 Depreciation for 2018 (4 months upto May 1) 28000 2. Balance of equipment Total equipment 47520000 Sold equipment 840000 Balance of equipment 46680000 Depreciation rate (10% - 10 year life) 4668000 Accumulated Depreciation as at Dec.31,2018 5040800                 (4,910,000 + 28,000 - 364,000 + 466,800) 3. Buildings Cost 29800000 Estimated life - years 50 Annual depreciation 596000 4. Land Cost at the begnning 4320000 Ad: Purchases 2000000 Less: Sold during the year 393000 Land at the end of the year 5927000

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