A company began operations on January 1, 2020. Purchases of property, plant and equipment during 2020 was as follows: Cost 2,800,000 Residual Value 2,800,000 Jan 1, 2020 Land 1 Building 1 Equipment 1 4,700,000 470,000 $500,000 100,000 April 30, 2020 4,200,000 4,200,000 Land 2 Building 2 Equipment 2 5,350,000 650,000 800,000 60,000 Buildings are being depreciated on a straight-line basis over an estimated useful life of 25 years and equipment is being depreciated using the diminishing balance method at the rate of 15% per year. The following transactions took place during 2021: Purchased Equipment 3 on February 28, 2021 for $195,000. 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 $365,000 on July 1, 2021. The bookkeeper was unsure how to handle the transaction and credited the proceeds to the equipment account. At December 31, 2021, the company reassessed the useful life and residual value of Building 2 at a total of 30 years with a $550,000 residual value. Required: A) Calculate the accumulated depreciation balance at December 31, 2020. B) Prepare the required journal entries at December 31, 2021 to account for the 2021 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, 2020. Purchases of property, plant and equipment during 2020 was as follows: Cost 2,800,000 Residual Value 2,800,000 Jan 1, 2020 Land 1 Building 1 Equipment 1 4,700,000 470,000 $500,000 100,000 April 30, 2020 4,200,000 4,200,000 Land 2 Building 2 Equipment 2 5,350,000 650,000 800,000 60,000 Buildings are being depreciated on a straight-line basis over an estimated useful life of 25 years and equipment is being depreciated using the diminishing balance method at the rate of 15% per year. The following transactions took place during 2021: Purchased Equipment 3 on February 28, 2021 for $195,000. 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 $365,000 on July 1, 2021. The bookkeeper was unsure how to handle the transaction and credited the proceeds to the equipment account. At December 31, 2021, the company reassessed the useful life and residual value of Building 2 at a total of 30 years with a $550,000 residual value. Required: A) Calculate the accumulated depreciation balance at December 31, 2020. B) Prepare the required journal entries at December 31, 2021 to account for the 2021 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, 2020. Purchases of property, plant and equipment during
2020 was as follows:
Residual Value
Cost
2,800,000
Jan 1, 2020
2,800,000
4,700,000
470,000
Land 1
Building 1
Equipment 1
Land 2
$500,000
100,000
April 30, 2020
4,200,000
4,200,000
5,350,000
650,000
Building 2
Equipment 2
800,000
60,000
Buildings are being depreciated on a straight-line basis over an estimated useful life of 25 years and
equipment is being depreciated using the diminishing balance method at the rate of 15% per year.
The following transactions took place during 2021:
●
Purchased Equipment 3 on February 28, 2021 for $195,000. 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 $365,000 on July 1, 2021. The bookkeeper was unsure how to handle the
transaction and credited the proceeds to the equipment account.
At December 31, 2021, the company reassessed the useful life and residual value of Building 2 at a total
of 30 years with a $550,000 residual value.
Required:
A) Calculate the accumulated depreciation balance at December 31, 2020.
B) Prepare the required journal entries at December 31, 2021 to account for the 2021 depreciation
and adjusting journal entry to correct the recording of the sale of the equipment during the
year.
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