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Plant assets and depreciation

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At December 31, 2017, XYZ Corporation reported the following plant assets.

Land \$ 3,000,000
Buildings \$26,500,000
Less: Accumulated depreciationâ€”buildings 11,925,000 14,575,000
Equipment 40,000,000
Less: Accumulated depreciationâ€”equipment 5,000,000 35,000,000
Total plant assets \$52,575,000

During 2018, the following selected cash transactions occurred.

Apr. 1 Purchased land for \$2,200,000.
May 1 Sold equipment that cost \$600,000 when purchased on January 1, 2011. The equipment was sold for \$170,000.
June 1 Sold land for \$1,600,000. The land cost \$1,000,000.
July 1 Purchased equipment for \$1,100,000.
Dec. 31 Retired equipment that cost \$700,000 when purchased on December 31, 2008. No salvage value was received.

Prepare the necessary journal entries.

Solution Preview

Journal entries:
Apr.1 Land [Debit] \$2,200,000
. . . Cash [Credit] \$2,200,000
May.1 Depreciation expense [Debit] \$20,000
. . . Accumulated depreciation [Credit] \$20,000
May.1 Cash [Debit] \$170,000
. Accumulated depreciation [Debit] \$440,000
. . . Equipment [Credit] . \$600,000
. . . Gain on disposal of plant assets ...

Solution Summary

The solution shows the computation of depreciation first and then the required journal entries.

\$2.49