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    Plant Assets - Acquisition, Disposal and Depreciation

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    At December 31, 2007 Ruiz Corporation reported the following plant assets

    Land $ 3,000,000
    Buildings $26,500,000
    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

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    https://brainmass.com/business/mergers-and-acquisitions/plant-assets-acquisition-disposal-and-depreciation-164395

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    a. Journal Entries
    April 1 Land 2,200,000 Land is purchased for cash
    Cash 2,200,000

    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
    Accumulated Depreciation-
    Equipment 484,000
    Equipment 660,000
    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 ...

    Solution Summary

    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

    $2.19

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