A company began operations on January 1, 2019. Purchases of property, plant and equipment during 2019 was as follows: Cost Residual Value Land 1 3,000,000 700,000 1,500,000 500,000 40,000 Jan 1, 2019 3,000,000 Building 1 Land 2 7,000,000 February 28, 2019 Building 2 Equipment 1 Equipment 2 1,500,000 4,500,000 400,000 600,000 May 30, 2019 100,000 Buildings are being depreciated on a straight-line basis over an estimated useful life of 40 years and equipment is being depreciated using the diminishing balance method at the rate of 20% per year. The following transactions took place during 2020: Purchased Equipment 3 on March 31, 2020 for $645,000. There is no residual value. For this piece of equipment, it was determined due to the nature of the equipment to depreciate straight line over 15 years. Sold equipment 1 for $300,000 on May 1, 2020. The bookkeeper was unsure how to handle the transaction and credited the proceeds to the equipment account. At December 31, 2020, the company reassessed the useful life and residual value of Building 2 at a total of 30 years with a $400,000 residual value. Required: A) Calculate the accumulated depreciation balance at December 31, 2019. B) Prepare the required journal entries at December 31, 2020 to account for the 2020 depreciation and adjusting journal entry to correct the recording of the sale of the equipment during the year.
A company began operations on January 1, 2019. Purchases of property, plant and equipment during 2019 was as follows: Cost Residual Value Land 1 3,000,000 700,000 1,500,000 500,000 40,000 Jan 1, 2019 3,000,000 Building 1 Land 2 7,000,000 February 28, 2019 Building 2 Equipment 1 Equipment 2 1,500,000 4,500,000 400,000 600,000 May 30, 2019 100,000 Buildings are being depreciated on a straight-line basis over an estimated useful life of 40 years and equipment is being depreciated using the diminishing balance method at the rate of 20% per year. The following transactions took place during 2020: Purchased Equipment 3 on March 31, 2020 for $645,000. There is no residual value. For this piece of equipment, it was determined due to the nature of the equipment to depreciate straight line over 15 years. Sold equipment 1 for $300,000 on May 1, 2020. The bookkeeper was unsure how to handle the transaction and credited the proceeds to the equipment account. At December 31, 2020, the company reassessed the useful life and residual value of Building 2 at a total of 30 years with a $400,000 residual value. Required: A) Calculate the accumulated depreciation balance at December 31, 2019. B) Prepare the required journal entries at December 31, 2020 to account for the 2020 depreciation and adjusting journal entry to correct the recording of the sale of the equipment during the year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A company began operations on January 1, 2019. Purchases of property, plant and equipment during
2019 was as follows:
Cost
Residual Value
Jan 1, 2019
Land 1
3,000,000
7,000,000
3,000,000
700,000
Building 1
February 28, 2019
Land 2
1,500,000
1,500,000
Building 2
Equipment 1
Equipment 2
4,500,000
400,000
500,000
40,000
Мау 30, 2019
600,000
100,000
Buildings are being depreciated on a straight-line basis over an estimated useful life of 40 years and
equipment is being depreciated using the diminishing balance method at the rate of 20% per year.
The following transactions took place during 2020:
Purchased Equipment 3 on March 31, 2020 for $645,000. There is no residual value. For this
piece of equipment, it was determined due to the nature of the equipment to depreciate
straight line over 15 years.
Sold equipment 1 for $300,000 on May 1, 2020. The bookkeeper was unsure how to handle the
transaction and credited the proceeds to the equipment account.
At December 31, 2020, the company reassessed the useful life and residual value of Building 2 at a total
of 30 years with a $400,000 residual value.
Required:
A) Calculate the accumulated depreciation balance at December 31, 2019.
B) Prepare the required journal entries at December 31, 2020 to account for the 2020 depreciation
and adjusting journal entry to correct the recording of the sale of the equipment during the
year.
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