Mayfield, Inc., has the following plant asset accounts: Land, Buildings, and Equipment, with a separate accumulated depreciation
Question:
Mayfield, Inc., has the following plant asset accounts: Land, Buildings, and Equipment, with a separate accumulated depreciation account for each of these except Land. Mayfield completed the following transactions:
Requirement
1. Record the transactions in Mayfield’s journal.
Traded in equipment with accumulated depreciation of $65,000 (cost of $132,000) for similar new equipment with a cash cost of $180,000. Received a trade-in allowance of $72,000 on the old equipment and paid $108,000 Jan 3 in cash. Sold a building that had a cost of $660,000 and had accumulated depreciation of $135,000 through December 31 of the preceding year. Depreciation is computed using the straight-line method. The building has a 40-year useful life and a residual value of $220,000. Mayfield received $105,000 cash and a $414,500 note receivable. Purchased land and a building for a single price of $370,000 cash. An indepen- dent appraisal valued the land at $147,000 and the building at $273,000. Recorded depreciation as follows: Equipment has an expected useful life of ten years and an estimated residual value of 12% of cost. Depreciation is computed using the double-declining-balance Jun 30 Oct 31 Dec 31 method. Depreciation on buildings is computed using the straight-line method. The new building carries a 40-year useful life and a residual value equal to 20% of its cost.
Step by Step Answer:
Journal DATE ACCOUNT TITLES DEBIT CREDIT Jan 3 Equipment new 180000 Accumulated ...View the full answer
Financial Accounting
ISBN: 978-0134725987
12th edition
Authors: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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