Question

BE10.14 (LO 5) Ottawa Corporation owns machinery that cost $20,000 when purchased on July 1, 2017. Depreciation has been recorded at a rate of $2,400 per year, resulting in a balance in accumulated depreciation of $8,400 at December 31, 2020. The machinery is sold on September 1, 2021, for $10,500. Prepare journal entries to (a) update depreciation for 2021 and (b) record the sale.

E10.1 (LO 1) (Acquisition Costs of Realty) The following expenditures and receipts are related to land, land improvements, and buildings acquired for use in a business enterprise. The receipts are enclosed in parentheses.

 a. Money borrowed to pay building contractor (signed a note) $(275,000)

b. Payment for construction from note proceeds 275,000

c. Cost of land fi ll and clearing 8,000

d. Delinquent real estate taxes on property assumed by purchaser 7,000

e. Premium on 6-month insurance policy during construction 6,000

f. Refund of 1-month insurance premium because construction completed early (1,000)

g. Architect’s fee on building 22,000

h. Cost of real estate purchased as a plant site (land $200,000 and building $50,000) 250,000

i. Commission fee paid to real estate agency 9,000

j. Installation of fences around property 4,000

k. Cost of razing and removing building 11,000

l. Proceeds from salvage of demolished building (5,000)

m. Interest paid during construction on money borrowed for construction 13,000

n. Cost of parking lots and driveways 19,000

o. Cost of trees and shrubbery planted (permanent in nature) 14,000

p. Excavation costs for new building 3,000 

Instructions

Identify each item by letter and list the items in columnar form, using the headings shown below. All receipt amounts should be reported in parentheses. For any amounts entered in the Other Accounts column, also indicate the account title.

Item             Land                Land Improvements                 Buildings             Other Accounts

Answer 1

BRIEF EXERCISE 10-14

 

(a)	Depreciation Expense ($2,400 X 8/12)..................	1,600
	Accumulated Depreciation—Machinery.....		1,600
(b)	Cash............................................................................ ......................................................................................	10,500
	Accumulated Depreciation—Machinery      ($8,400 + $1,600)..................................................	10,000
	Machinery.........................................................		20,000
	Gain on Disposal of Machinery....................		500

 

EXERCISE 10-1 

 

Item		Land		Land Improvements		Building		Other Accounts
(a)								($275,000) Notes Payable
(b)						$275,000
(c)		$    8,000
(d)		7,000
(e)						6,000
(f)						(1,000)
(g)						22,000
(h)		250,000
(i)		9,000
(j)				$  4,000
(k)		11,000
(l)		(5,000)
(m)						13,000
(n)				19,000
(o)		14,000
(p)						3,000

 

BRIEF EXERCISE 10-14

 

 

(a)	Depreciation Expense ($2,400 X 8/12)..................	1,600
	Accumulated Depreciation—Machinery.....		1,600
(b)	Cash............................................................................ ......................................................................................	10,500
	Accumulated Depreciation—Machinery      ($8,400 + $1,600)..................................................	10,000
	Machinery.........................................................		20,000
	Gain on Disposal of Machinery....................		500

 

EXERCISE 10-1

 

Item		Land		Land Improvements		Building		Other Accounts
(a)								($275,000) Notes Payable
(b)						$275,000
(c)		$    8,000
(d)		7,000
(e)						6,000
(f)						(1,000)
(g)						22,000
(h)		250,000
(i)		9,000
(j)				$  4,000
(k)		11,000
(l)		(5,000)
(m)						13,000
(n)				19,000
(o)		14,000
(p)						3,000