Question

Problem 9-5A (Part Level Submission) At December 31, 2015, Grand Company reported the following as plant assets. Land $4,147,000 Buildings $27,842,000 Less: Accumulated depreciation—buildings 10,769,000 17,073,000 Equipment 48,828,000 Less: Accumulated depreciation—equipment 5,126,000 43,702,000 Total plant assets $64,922,000 During 2016, the following selected cash transactions occurred. April 1 Purchased land for $2,195,000. May 1 Sold equipment that cost $786,000 when purchased on January 1, 2012. The equipment was sold for $471,600. June 1 Sold land purchased on June 1, 2006 for $1,456,000. The land cost $391,000. July 1 Purchased equipment for $2,309,000. Dec. 31 Retired equipment that cost $484,000 when purchased on December 31, 2006. No salvage value was received. Collapse question part (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. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

JOURNAL ENTRIES

LAND

April 2016

1. Land……………………..Debit   2195000

    To Cash (Credit)                     2195000

(Being purchase of Land)

June 2016

1. Bank………………………Debit   1456000

   To Land (Credit)                   391000

   To Profit on sale of Land (Credit)           1065000

       (Being sale of land a non depreciable asset, profit on sale is credited to statement of Profit and Loss)

EQUIPMENT

May 2016

1. Bank……………………………Debit    471600

      To Equipment (Credit) 436393

      To Profit on Sale of equipment (Credit) 35207

(Being Profit booked on sale of equipment,

Depreciation: 781600/10=78160

Depreciation for 2012-2016: 78160 X 4= 312640

Depreciation for January to May : 78160/12*5=32567

Total Depreciation : 345207

Book value of asset: 781600-345207= 436393

Profit on sale: 471600-436393=35207)

July 2016

4. Equipment……………………………………..Debit 2309000

To Cash                (Credit)                     2309000

(Being purchase of equipment)

5. Retirement of equipment as the value of machinery is equivalent to accumulated depreciation on the equipment over 10 years

6. Depreciation…………………………………..Debit 556840

To Accumulated Depreciation (Credit)         556840

(Depreciation= 27842000/50=556840, charged)

7. Depreciation…………………………….Debit      50387967

To Accumulated Depreciation(Credit)            50387967

       ( Depreciation: 48828000-781600+2309000+32567=50387967)