Base Company carried out the following transactions during Years 1 to Year 6. Year 1: January 1: Purchased equipment for $120,000 cash. It has a 10-year life, a $20,000 residual value, and will be depreciated using the straight-line method. January 1: Purchased land for $280,000 cash. October 31: Borrowed $340,000 from the bank by issuing a three-month 9% note. December 31: Accrued interest on the note of October 31. You can round to the nearest full month. December 31: A pending product liability lawsuit will more likely than not be lost. A reasonable estimate of the loss is $50,000. We accrued the contingency. December 31: Journalized depreciation on the equipment. Year 2: January 31: Repaid the October 31 note plus interest. Year 6: July 10: Traded our land (acquired in Year 1) plus $60,000 cash for a small airplane. The airplane has a market value of $380,000. September 20: Sold the equipment for $52,000 cash. Depreciation expense for Years 2 to 5 has already been properly recorded. Instructions: Prepare all the required journal entries for the above transactions.
Question 2
Base Company carried out the following transactions during Years 1 to Year 6.
Year 1:
-
January 1: Purchased equipment for $120,000 cash. It has a 10-year life, a $20,000 residual value, and will be
depreciated using the straight-line method. -
January 1: Purchased land for $280,000 cash.
-
October 31: Borrowed $340,000 from the bank by issuing a three-month 9% note.
-
December 31: Accrued interest on the note of October 31. You can round to the nearest full month.
-
December 31: A pending product liability lawsuit will more likely than not be lost. A reasonable estimate of the loss is $50,000. We accrued the contingency.
-
December 31: Journalized depreciation on the equipment.
Year 2:
-
January 31: Repaid the October 31 note plus interest.
Year 6:
-
July 10: Traded our land (acquired in Year 1) plus $60,000 cash for a small airplane. The airplane has a market value of $380,000.
-
September 20: Sold the equipment for $52,000 cash. Depreciation expense for Years 2 to 5 has already been properly recorded.
Instructions:
Prepare all the required
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