Belkin Freight provides general freight service in Canada. The business's balance sheet includes the following assets under Property, Plant, and Equipment: Land, Buildings, and Motor Carrier Equipment. Belkin Freight has a separate accumulated amortization account for each of these assets except land.
Assume that Belkin Freight completed the following transactions during 2017:
Feb. 6 Traded in motor carrier equipment with a book value of $86,000 (cost of $280,000) for similar new equipment with a fair market value of $330,000. Belkin Freight received a trade-in allowance of $120,000 on the old equipment and paid the remainder in cash. This transaction met the criteria for commercial substance.
Jun. 3 Sold a building that had cost $1,250,000 and had accumulated amortization of $577,500 through December 31, 2016. Amortization is computed on a straight-line basis. The building has a 40-year useful life and a residual value of $150,000. Belkin Freight received $300,000 cash and a $1,000,000 note receivable.
Sep. 25 Purchased land and a building for cash for a single price of $790,000. An independent appraisal valued the land at $250,000 and the building at $375,000.
Dec. 31 Motor carrier equipment has an expected useful life of four years and an estimated residual value of 6 percent of cost. Amortization is computed using the DDB method.
Amortization on buildings is computed by the straight-line method. The company had assigned to its older buildings, which cost $3,900,000, an estimated useful life of 30 years with a residual value equal to 30 percent of the asset cost. However, the owner of Belkin Freight has come to believe that the buildings will remain useful for a total of 35 years. Residual value remains unchanged. The company has used all its buildings, except for the one purchased on September 25, for 10 years. The new building carries a 35-year useful life and a residual value equal to 30 percent of its cost. Make separate entries for amortization on the building acquired on September 25 and the other buildings purchased in earlier years.
Required Record the transactions in Belkin Freight's general journal.