P10-5A At December 31, 2017, Grand Company reported the following as plant asset
ID: 2566551 • Letter: P
Question
P10-5A At December 31, 2017, Grand Company reported the following as plant assets. Jou equi rela reti Land Buildings Less: Accumulated depreciation-buildings12,100,000 Equipment Less: Accumulated depreciation-equipment $ 4,000,000 16,400,000 43,000,000 $28,500,000 (LO 48,000,000 5,000,000 Total plant assets During 2018, the following selected cash transactions occurred. Purchased land for $2,130,000. Sold equipment that cost $750,000 when purchased on January 1, 2014. The equipment was sold for $450,000. Sold land purchased on Jun Purchased equipment for $2,500,000. Retired equipment that cost $500,000 when purchased on December 31, 2008. The company received no proceeds related to salvage. April 1 May 1 June 1 July 1 Dec. 31 Instructions (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 value. Update depreciation on assets disposed of at the time of sale or retirement ( salvage (b) Record adjusting entries for depreciation for 2018 ) Prepare the plant assets section of Grand's balance sheet at December 31, 2018.Explanation / Answer
A.
Straight line depreciation on equipment sold on May 1
Depreciation = (cost - salvage value) / useful life
= (750,000 - 0) / 10 = 75,000
Accumulated depreciation from January 1, 2014 to December 31, 2017 = 4 * 75,000 = 300,000
Depreciation from January 1, 2018 to May 1, 2018 = 75,000 * 4 /12 = 25,000
Total accumulated depreciation = 300,000 + 25,000 = 325,000
Straight line depreciation on equipment retired on December 31
Depreciation = (cost - salvage value) / useful life
= (500,000 - 0) / 10 = 50,000
Accumulated depreciation from December 31, 2008 to December 31, 2018 = 10 * 50,000 = 500,000
JOURNAL ENTRIES
B.
Depreciation on Buildings = (cost - salvage value) / useful life
(28,500,000 - 0) / 50 = 570,000
Cost of equipment after sale and retairment = 48,000,000 - 750,000 - 500,000 = 3,550,000
Depreciation on equipment = (cost - salvage value) / useful life = (3,550,000 - 10) / 10 = 355,000
Depreciation on equipment purchased on July 1 = (2,500,000 - 0) / 10 * 6 / 12 = 125,000
Total depreciation on equipment = 355,000 + 125,000 = 480,000
ADJUSTING ENTRIES FOR DEPRECIATION
C.
Accumulated depreciation on Buildings = 12,100,000 + 570,000 = 12,670,000
Accumulated depreciation on Equiment sold and retaired = 825,000
Accumulated depreciation on equipment = 5,000,000 - 825,000 + 480,000 = 4,655,000
April 1 Land 2,130,000 Cash 2,130,000 May 1 Cash 450,000 Accumulated depreciation 325,000 Equipment 750,000 Gain on sale (plug) 25,000 June 1 Cash 1,500,000 Land 400,000 Gain on sale 1,100,000 July 1 Equipment 2,500,000 Cash 2,500,000 Dec 31 Accumulated depreciation 500,000 Equipment 500,000Related Questions
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