Title Prepare the journal entries to record the transactions on April 1 and August 1, 2012. Description (Disposition of Assets) On April 1, 2012, Pavlova Company received a condemnation award of $410,000 cash as compensation for the forced sale of the company’s land and building, which stood in the path of a new state highway. The land and building cost $60,000 and $280,000, respectively, when they were acquired. At April 1, 2012, the accumulated depreciation relating to the building amounted to $160,000. On August 1, 2012, Pavlova purchased a piece of replacement property for cash. The new land cost $90,000, and the new building cost $380,000. Instructions Prepare the journal entries to record the transactions on April 1 and August 1, 2012.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
(Disposition of Assets) On April 1, 2012, Pavlova Company received a condemnation award of $410,000 cash as compensation for the forced sale of the company’s land and building, which stood in the path of a new state highway. The land and building cost $60,000 and $280,000, respectively, when they were acquired. At April 1, 2012, the
Instructions
Prepare the journal entries to record the transactions on April 1 and August 1, 2012.
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