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: Prepare the plant assets section of Grand’s balance sheet at December 31, 2018. (List Plant Assets in order of Land, Buildings and Equipment.)

Answer 1

A.

Grand Company
Journal entries for the year 2018
Date	Account Title	Debit	Credit
April.1	Land	2000000
	Cash		2000000
	(Purchase of land )
May.1	Depreciation Expense	28000
	Accumulated Depreciation - Equipment		28000
	(Depreciation expense on the equipment sold)
May.1	Cash	504000
	Accumulated Depreciation - Equipment	364000
	Equipment		840000
	Gain on sale of equipment		48000
	(Sale of equipment purchased in 2014 )
June.1	Cash	1430000
	Land		393000
	Gain on sale of land		1037000
	(Sale of land costing )
Dec.31	Depreciation Expense	5264000
	Accumulated Depreciation - Equipment		4668000
	Accumulated Depreciation - Building		596000
	(Depreciation expense for the year recorded)
	Working:
	1. Equipment sold on May.1
	Cost	840000
	Estimated life - years	10
	Annual depreciation	84000
	Depreciation for the years 2014 to 2017 (4 years)	336000
	Depreciation for 2018 (4 months upto May 1)	28000
	2. Balance of equipment
	Total equipment	47520000
	Sold equipment	840000
	Balance of equipment	46680000
	Depreciation rate (10% - 10 year life)	4668000
	Accumulated Depreciation as at Dec.31,2018	5040800
	(4,910,000 + 28,000 - 364,000 + 466,800)
	3. Buildings
	Cost	29800000
	Estimated life - years	50
	Annual depreciation	596000
	4. Land
	Cost at the begnning	4320000
	Ad: Purchases	2000000
	Less: Sold during the year	393000
	Land at the end of the year	5927000

B.

Grand Company
Balance sheet (Partial)
as at December 31, 2018
Plant Assets
Land		5927000
Building:
Cost	29800000
Less: Acumulated Depreciation	11166000	18634000
Equipment	47520000
Less: Acumulated Depreciation	5040800	42479200
Total Plant Assets		67040200