Question

Question 4 At December 31, 2016, Bonita Ltd. reported the following as plant assets. Land £ 2,961,000 Buildings £28,521,000 Less: Accumulated depreciation-buildings 11,791,000 16,730,000 Equipment 40,586,000 Less: Accumulated depreciation-equipment 5,383,000 35,203,000     Total plant assets £54,894,000 During 2017, the following selected cash transactions occurred. Mar. 1 Purchased land for £2,052,000. April 1 Sold equipment that cost £424,000 when purchased on January 1, 2013. The equipment was sold for £250,160. June 1 Sold land purchased on June 1, 2007, for £1,533,000. The land cost £304,000. Oct. 1 Purchased equipment for £1,498,000. Dec. 31 Retired equipment that cost £503,000 when purchased on December 31, 2007. No residual value was received.

Journalize the above transactions. Bonita uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 50-year useful life and no residual value. The equipment is estimated to have a 10-year useful life and no residual value. Update depreciation on assets disposed of at the time of sale or retirement. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Mar. 1Apr. 1June 1Oct. 1Dec. 31 Mar. 1Apr. 1June 1Oct. 1Dec. 31 (To record depreciation) Apr. 1 (To record sale of equipment) Mar. 1Apr. 1June 1Oct. 1Dec. 31 Mar. 1Apr. 1June 1Oct. 1Dec. 31 Mar. 1Apr. 1June 1Oct. 1Dec. 31 (To record depreciation) Mar. 1Apr. 1June 1Oct. 1Dec. 31 (To record retirement of equipment)

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Mar. 1	Land	2052000
	Cash		2052000
	(To record purchase of land)
Apr. 1	Depreciation expense	10600
	Accumulated depreciation-equipment		10600
	(To record depreciation)
Apr. 1	Cash	250160
	Accumulated depreciation-equipment	180200
	Gain on disposal		6360
	Equipment		424000
	(To record sale of equipment)
Jun. 1	Cash	1533000
	Gain on disposal		1229000
	Land		304000
	(To record sale of land)
Oct. 1	Equipment	1498000
	Cash		1498000
	(To record purchase of equipment)
Dec. 31	Depreciation expense	50300
	Accumulated depreciation-equipment		50300
	(To record depreciation)
Dec. 31	Accumulated depreciation-equipment	503000
	Equipment		503000
	(To record retirement of equipment)

Working:

1. Annual depreciation on equipment = £424000/10 years = £42400

Depreciation for 3 months = £42400 x 3/12 = £10600

Accumulated depreciation = [(£42400 x 4 years) + £10600] = £169600 + £10600 = £180200

2. Annual depreciation on equipment = £503000/10 years = £50300