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 depreciation—buildings 11,925,000 14,575,000
Equipment 40,000,000
Less: Accumulated depreciation—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.
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Solution Summary
The solution shows the computation of depreciation first and then the required journal entries.
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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 ...
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