Question

At January 1, 2017, Sheridan Company reported the following property, plant, and equipment accounts: Accumulated depreciation—buildings $64,150,000 Accumulated depreciation—equipment 53,500,000 Buildings 97,500,000 Equipment 150,200,000 Land 22,400,000 The company uses straight-line depreciation for buildings and equipment, its year-end is December 31, and it makes adjustments annually. 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. During 2017, the following selected transactions occurred: Apr. 1 Purchased land for $4.60 million. Paid $1.150 million cash and issued a 3-year, 6% note payable for the balance. Interest on the note is payable annually each April 1. May 1 Sold equipment for $340,000 cash. The equipment cost $3.60 million when originally purchased on January 1, 2009. June 1 Sold land for $4.32 million. Received $660,000 cash and accepted a 3-year, 5% note for the balance. The land cost $1.20 million when purchased on June 1, 2011. Interest on the note is due annually each June 1. July 1 Purchased equipment for $2.40 million cash. Dec. 31 Retired equipment that cost $1 million when purchased on December 31, 2007. No proceeds were received.

a. Prepare a tabular summary that includes the property, plant, and equipment balances as of January 1, 2017

b. Record the above transactions in the tabular summary from part (a)

c.Record any adjustments required at December 31

d. Prepare the property, plant, and equipment section of the company’s statement of financial position at December 31

Answer 1

Answer-

In the books of Sheridan Company:

Date	Account Titles	Debit	Credit
2017		$	$
April 1	Land	4,600,000
	Cash		1,150,000
	Note Payable		3,450,000
May 1	Depreciation Expense $ 3,600,000/10 x 4/12	120,000
	Accumulated Depreciation - Equipment		120,000
May 1	Cash	340,000
	Accumulated Depreciation - Equipment $ 3,600,000/ 10 x 8 + $ 120,000	3,000,000
	Loss on Disposal	260,000
	Equipment		3,600,000
June 1	Cash	660,000
	Note Receivable	3,660,000
	Land		1,200,000
	Gain on Disposal		3,120,000
July 1	Equipment	2,400,000
	Cash		2,400,000
Dec 31	Depreciation Expense $ 1,000,000/10	100,000
	Accumulated Depreciation - Equipment		100,000
Dec 31	Accumulated Depreciation - Equipment	1,000,000
	Equipment		1,000,000
Dec 31	Depreciation Expense	17,117,500
	Accumulated Depreciation - Buildings $ 97,500,000 / 40		2,437,500
	Accumulated Depreciation - Equipment $ ( 150,200,000 - 3,600,000 - 1,000,000) / 10 + $ 2,400,000/10 x 1/2		14,680,000
December 31	Interest Expense $ ( 3,450,000 x 6 % x 9/12)	155,250
	Interest Payable		155,250
December 31	Interest Receivable $ (3,660,000 x 5 % x 7/12)	106,750
	Interest Revenue		106,750

3. Sheridan Company

Statement of Financial Position ( Partial)

December 31, 2017

Property, Plant and Equipment

	$
Accumulated Depreciation - Buildings	(66,587,500)
Accumulated Depreciation - Equipment	(64,400,000)
Buildings	97,500,000
Equipment	148,000,000
Land	25,800,000

Computation of the ending balances of fixed assets :

	Buildings	Equipment	Land
Cost, January 1, 2017	$ 97,500,000	$ 150,200,000	$ 22,400,000
Cost of Purchase	0	2,400,000	4,600,000
Cost of Asset Sold	0	(3,600,000)	(1,200,000)
Cost of Asset Retired	-	(1,000,000)	-
Cost, December 31, 2017	$ 97,500,000	$ 148,000,000	$ 25,800,000