A company began operations on January 1, 20x4. Purchases of property, plant and equipment during 20x4 were as follows: Residual Cost Value Jan 2, 20x4 Land 1 $3,500,000 $3,500,000 Building 1 5,000,000 500,000 Equipment 1 600,000 100,000 Equipment 2 500,000 60,000 Feb 28, 20x4 Land 2 2,500,000 2,500,000 Building 2 3,400,000 400,000 Equipment 3 Equipment 4 Apr 30, 20x4 Equipment 5 300,000 40,000 800,000 100,000 400,000 30,000 Buildings are being depreciated on the straight-line basis over an estimated useful life of and equipment is being depreciated using the diminishing balance method at 30 years the rate of 15% per year. The following transactions took place during 20x5: Purchased Equipment 6 on January 2, 20x5 for $560,000. There is no residual value. Due to the nature of this equipment, it was decided to depreciate it straight line over 20 years. Sold equipment 2 for $400,000 on June 1, 20x5. The bookkeeper was unsure on how to handle this transaction and credited the proceeds to the equipment account. Any gain or loss on sale should be recorded to administrative expenses. At December 31, 20x5, the company reassessed the useful life and residual value of Building 2 at a total of 40 years with a $200,000 residual value. The unadjusted trial balance shows a balance of $575,833 for Accumulated Depreciation as at December 31, 20x5. Required - Prepare the required journal entries at December 31, 20x5. In addition, show how the accumulated depreciation balance at December 31, 20x4 was calculated.
A company began operations on January 1, 20x4. Purchases of property, plant and equipment during 20x4 were as follows: Residual Cost Value Jan 2, 20x4 Land 1 $3,500,000 $3,500,000 Building 1 5,000,000 500,000 Equipment 1 600,000 100,000 Equipment 2 500,000 60,000 Feb 28, 20x4 Land 2 2,500,000 2,500,000 Building 2 3,400,000 400,000 Equipment 3 Equipment 4 Apr 30, 20x4 Equipment 5 300,000 40,000 800,000 100,000 400,000 30,000 Buildings are being depreciated on the straight-line basis over an estimated useful life of and equipment is being depreciated using the diminishing balance method at 30 years the rate of 15% per year. The following transactions took place during 20x5: Purchased Equipment 6 on January 2, 20x5 for $560,000. There is no residual value. Due to the nature of this equipment, it was decided to depreciate it straight line over 20 years. Sold equipment 2 for $400,000 on June 1, 20x5. The bookkeeper was unsure on how to handle this transaction and credited the proceeds to the equipment account. Any gain or loss on sale should be recorded to administrative expenses. At December 31, 20x5, the company reassessed the useful life and residual value of Building 2 at a total of 40 years with a $200,000 residual value. The unadjusted trial balance shows a balance of $575,833 for Accumulated Depreciation as at December 31, 20x5. Required - Prepare the required journal entries at December 31, 20x5. In addition, show how the accumulated depreciation balance at December 31, 20x4 was calculated.
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter18: Accounting For Long-term Assets
Section: Chapter Questions
Problem 1SEB
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Transcribed Image Text:A company began operations on January 1, 20x4. Purchases of property, plant and
equipment during 20x4 were as follows:
Residual
Cost
Value
Jan 2, 20x4
Land 1
$3,500,000
$3,500,000
Building 1
5,000,000
500,000
Equipment 1
600,000
100,000
Equipment 2
500,000
60,000
Feb 28, 20x4
Land 2
2,500,000
2,500,000
Building 2
3,400,000
400,000
Equipment 3
Equipment 4
Apr 30, 20x4 Equipment 5
300,000
40,000
800,000
100,000
400,000
30,000
Buildings are being depreciated on the straight-line basis over an estimated useful life of
and equipment is being depreciated using the diminishing balance method at
30
years
the rate of 15% per year.
The following transactions took place during 20x5:
Purchased Equipment 6 on January 2, 20x5 for $560,000. There is no residual
value. Due to the nature of this equipment, it was decided to depreciate it
straight line over 20 years.
Transcribed Image Text:Sold equipment 2 for $400,000 on June 1, 20x5. The bookkeeper was unsure on
how to handle this transaction and credited the proceeds to the equipment
account. Any gain or loss on sale should be recorded to administrative expenses.
At December 31, 20x5, the company reassessed the useful life and residual value of
Building 2 at a total of 40 years with a $200,000 residual value.
The unadjusted trial balance shows a balance of $575,833 for Accumulated Depreciation
as at December 31, 20x5.
Required - Prepare the required journal entries at December 31, 20x5. In addition, show
how the accumulated depreciation balance at December 31, 20x4 was calculated.
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