On April 1, 2007 Pepsi received an condemnation award of $430,000 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, 2007 the accumulated depreciation relating to the building amounted to $160,000. On August 1, 2007, Pepsi purchased a piece of replacement property for cash. The new land cost $90,000 and the new building cost $400,000
Prepare the journal entries to record the transactions on April and August 1, 2007.© BrainMass Inc. brainmass.com March 4, 2021, 9:07 pm ad1c9bdddf
Condemnation award $430,000
Basis in property:
Land $ 60,000
Less accumulated depreciation (160,000)
Adjusted basis in property $180,000
Gain had there been a sale $250,000
New property purchase price $400,000
See Excel attached for entries and further explanations.
Journal Entries: Debit Credit
Accumulated depreciation 160,000
The solution includes all the journal entries plus extensive notes explaining the law regarding condemnations and the facts in this problem.