Question

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

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

During 2018, the following selected cash transactions occurred.

April 1		Purchased land for $2,000,000.
May 1		Sold equipment that cost $840,000 when purchased on January 1, 2014. The equipment was sold for $504,000.
June 1		Sold land purchased on June 1, 2008 for $1,430,000. The land cost $393,000.
July 1		Purchased equipment for $2,440,000.
Dec. 31		Retired equipment that cost $480,000 when purchased on December 31, 2008. The company received no proceeds related to salvage.

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: Record adjusting entries for depreciation for 2018.

Answer 1

Journal Entry in the books of Grand Company
S.No.	Date	Account & Explanation	Debit	Credit
Part-A	01/04/2018	Land	$2,000,000
		Cash		$2,000,000
		To Record Purchase of Land
	01/05/2018	Depreciation	$28,000
		Accumulated Depreciation -Equipment		$28,000
		($840000/10*4/12)
		To Record Depreciaiton upto the date of Sale
	01/05/2018	Cash	$504,000
		Accumulated Depreciation ($336000+$28000)	$364,000
		Equipment		$840,000
		Gain on sale of Investment		$28,000
		To Record deprecition upto the date of Sale
	01/06/2018	Cash	$1,430,000
		Land		$393,000
		Gain on sale of Land		$1,037,000
		To record sale of Land
	01/07/2018	Equipment	$2,440,000
		Cash		$2,440,000
		To record Purchase of Equipment
	31/12/2018	Depriciation ($480000/10)	$48,000
		Accumulated Depreciation-Equipment		$48,000
		To Record depreciation for the year 2018 on retired Equipment
	31/12/2018	Accumulated Depreciation-Equipment	$480,000
		Equipment		$480,000
		To record retirement of Equipment
Part-B	31/12/2018	Depreciation	$596,000
		Accumulated Depreciation-Building		$596,000
		To Record Depreciaiton on Building for 2018
		Depriciation	$4,742,000
		Accumulated Depreciation-Equipment		$4,742,000
		To Record depreciation for the year 2015
		($47520000-$840000-$480000)*1/10+$2440000/10*6/12