Question

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

Land                                                                                                                                                      4,000,000

Building                                                                                                28,500,000

Less: Accumulated depreciation – buildings                          12,100,000                          16,400,000

Equipment                                                                                          48,000,000

Less: Accumulated depreciation – equipment                     5,000,000                           43,000,000

                Total plant assets                                                                                                             63,400,000

During 2018, the following selected cash transactions occurred.

April 1   Purchased land for $2,130,000

May 1    Sold equipment that cost $75,000 when purchased on January 1, 2014. The equipment was sold                 for $450,000.

June 1   Sold land purchased on June 1, 2008 for $1,500,000. The land cost $400,000.

July 1     Purchased equipment for $2,500,000.

Dec. 31 Retired equipment that cost $500,000 when purchased on December 31, 2008. The company received no proceeds related to salvage.

Instructions:

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

Record adjusting entries for depreciation for 2018.

Prepare the plant assets section of Grand’s balance sheet at December 31, 2018.

Answer 1

1. Journal entries:

Date	Particulars	Debit	Credit
1-Apr-18	Land	2,130,000.00
	Cash		2,130,000.00
1-May-18	Depreciation expense	25,000.00
	Accumulated depreciation - Equipment		25,000.00
	(750,000*1/10*4/12)
1-May-18	Cash	450,000.00
	Accumulated depreciation - Equipment [(750000*1/10*4)+25000]	325,000.00
	Equipment		750,000.00
	Gain on Disposal of Plant Assets		25,000.00
1-Jun-18	Cash	1,500,000.00
	Land		400,000.00
	Gain on Disposal of Plant Assets		1,100,000.00
1-Jul-18	Equipment	2,500,000.00
	Cash		2,500,000.00
31-Dec-18	Depreciation expense	50,000.00
	Accumulated depreciation - Equipment		50,000.00
	(500,000*1/10)
31-Dec-18	Accumulated depreciation - Equipment	500,000.00
	Equipment		500,000.00

2. Adjusting entries for depreciation of 2018:

Date	Particulars	Debit	Credit
31-Dec-18	Depreciation expense	570,000.00
	Accumulated depreciation - Equipment		570,000.00
	(28,500,000/50)
31-Dec-18	Depreciation expense	4,800,000.00
	Accumulated depreciation - Equipment		4,800,000.00
	(48,000,000-750,000-500,000)*1/10	4,675,000.00
	(2,500,000*1/10)*6/12	125,000.00
	Total	4,800,000.00

3. Plant asset section of Grand's balance sheet at 12.31.2018:

Plant Assets
Land		5,730,000.00
Buildings	28,500,000.00
less: Accumulated Depreciation - Buildings	12,670,000.00	15,830,000.00
Equipment	49,250,000.00
less: Accumulated Depreciation - Equipments	9,050,000.00	40,200,000.00
Total plant assets		61,760,000.00

Calculations for "3" can be viewed below:

Plant Assets
Land		=4000000+2130000-400000
Buildings	28500000
less: Accumulated Depreciation - Buildings	=12100000+570000	=G50-G51
Equipment	=48000000-750000+2500000-500000
less: Accumulated Depreciation - Equipments	=5000000+25000-325000+50000-500000+4800000	=G52-G53
Total plant assets		=H49+H51+H53