Please see attached file.
At December 31, 2007 Ruiz Corporation reported the following plant assets
Land $ 3,000,000
Less Accumulated Dep. Buildings $12,100,000 $ 14,400,000
Equipment $ 40,000,000
Less: Accumulated Dep. Equip. $ 5,000,000 $ 35,000,000
Total Plant Assets $ 52,400,000
During 2008, the following selected cash transactions occurred:
Apr. 1 purchased land for $ 2,200,000
May 1 sold equipment that cost $660,000 when purchased on January 1, 2001. The equipment was sold for $ 200,000.
June 1 sold land for $ 1,800,000. The land cost $ 700,000
July 1 purchased equipment for $ 1,300,000.
Dec 31 retired equipment that cost 500,000 when purchased on December 31, 1998. No salvage value was received.
A) Journalize the transactions, Ruiz uses straight line depreciation for buildings and equipment. The buildings are estimated to have a 40 year useful life and no salvage value; the equipment is estimated a 10 year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement.
B) Record adjusting entries for 2008
C) Prepare the plant assets section of Ruiz balance sheet at December 31, 2008
Please see the attached file.
a. Journal Entries
April 1 Land 2,200,000 Land is purchased for cash
May 1 Depreciation Expense 22,000 The equipment is sold, we adjust the depreciation
Accumulated Depreciation- account for 4 months till May 1, given that the
Equipment 22,000 life of equipment is 10 years
($660,000 X 1/10 X 4/12)
1 Cash 200,000
Gain on Disposal 24,000
Cost $660,000 The calculation of gain
Accum. depr.-Equipment 484,000 The accumulated depreciation is for 7 years + 4 months
[($660,000 X 1/10) X 7 + $22,000)]
Book value 176,000
Cash proceeds ...
The solution explains the journal entries related to plant assets - acquisition, disposal and depreication. It also explains how to prepare the plant assets section of the balance sheet