The company began operations on January 1, 2019. Purchases of property, plant, and equipment during 2019 were as follows:

		Cost	Residual Value
Jan 1, 2019	Land 1	3,000,000	3,000,000
	Building 1	7,000,000	700,000
February 28, 2019	Land 2	1,500,000	1,500,000
	Building 2	4,500,000	500,000
	Equipment 1	400,000	40,000
May 30, 2019	Equipment 2	600,000	100,000

Buildings are being depreciated on a straight‐line basis over an estimated useful life of 40 years and equipment is being depreciated using the diminishing balance method at the rate of 20% per year.

The following transactions took place in 2020:

• Purchased Equipment 3 on March 31, 2020, for $645,000. There is no residual value. For this piece of equipment, it was determined due to the nature of the equipment to depreciate straight line over 15 years.
• Sold equipment 1 for $300,000 on May 1, 2020. The bookkeeper was unsure how to handle the transaction and credited the proceeds to the equipment account.

On December 31, 2020, the company reassessed the useful life and residual value of Building 2 at a total of 30 years with a $400,000 residual value.

Required:

1. Calculate the accumulated depreciation balance on December 31, 2019.
2. Prepare the required journal entries on December 31, 2020, to account for the 2020 depreciation and adjust journal entries to correct the recording of the sale of the equipment during the year.

 

Answer rating: 100% (QA)

Calculate the accumulated depreciation balance on December 31 2019 as fol... View the full answer