Question

At December 31, 2022. Indigo Corporation reported the following plant assets. Land $5,358,000 Buildings $26,710,000 Less: Accumulated depreciation-buildings 21,298,050 5,411,950 Equipment 71,440,000 Less: Accumulated depreciation-equipment 8,930,000 62,510,000 Total plant assets $73,279,950 During 2023, the following selected cash transactions occurred. 1 Purchased land for $3,929,200. 1 Sold equipment that cost $1,071,600 when purchased on January 1, 2016. The equipment was sold for $303,620. Apr. May June 1 Sold land for $2,857,600. The land cost $1,786,000. July 1 Purchased equipment for $1.964,600. Dec. 31 Retired equipment that cost $1,250,200 when purchased on December 31, 2013. No salvage value was received.

Answer 1

Solution: Journal entries

Date	Account Titles and Explanation	Debit	Credit
Apr.1,2023	Land	$   3,929,200
	Cash		$        3,929,200
	[ Being land purchased]
May.1,2023	Depreciation Expense	$         35,720
	Accumulated Depreciation		$              35,720
	(Being depreciation on equipment sold)
May.1,2023	Cash	$       303,620
	Accumulated Depreciation	$       785,840
	Equipment		$        1,071,600
	Gain on disposal of equipment		$              17,860
	(Being equipment sold)
Jun.1,2023	Cash	$   2,857,600
	Gain on disposal of land		$        1,071,600
	Land		$        1,786,000
	(Being land sold)
Jul.1,2023	Equipment	$   1,964,000
	Cash		$        1,964,000
	(Being equipment purchased)
Dec.31,2023	Depreciation Expense	$       125,020
	Accumulated Depreciation		$            125,020
	(Being depreciation on equipment retired)
Dec.31,2023	Accumulated Depreciation	$   1,250,200
	Equipment		$        1,250,200
	(Being equipment retired)

Adjusting Entries

Dec.31,2023	Depreciation Expense	$       667,750
	Accumulated Depreciation- Buildings		$            667,750
	(Being depreciation )
Dec.31,2023	Depreciation Expense	$   7,010,050
	Accumulated Depreciation- Equipment		$        7,010,050
	(Being depreciation )

Balance Sheet ( Partial )

INDIGO CORPORATION
Balance Sheet (partial)
For the year ended December 31,2023
PLANT ASSETS
Land		$             7,501,200
Buildings	$        26,710,000
Less: Accumulated Depreciation-Buildings	$        21,965,800	$             4,744,200
Equipment	$        71,082,800
Less: Accumulated Depreciation-Equipment	$        15,940,050	$          55,142,750
Total Plant Assets		$          67,388,150

Working Notes:

1)

Date	Particulars	Total Cost	Accumulated Depreciation	Book Value	Depreciable Months	Depreciation	Book Value After Depreciation	Selling Price	Gain/loss
Opening Balance		$           71,440,000	$             8,930,000	$      62,510,000
May 1,2023	Sold Equipment	$             1,071,600	$                 750,120	$            321,480	4 Months	$             35,720	$       285,760	$        303,620	$                         17,860
July 1,2023	Purchase Equipment	$             1,964,600	$                             -	$        1,964,600	6 Months	$             98,230	$   1,866,370	$                    -	$                                   -
Dec 31,2023	Retired Equipment	$             1,250,200	$             1,125,180	$            125,020	12 Months	$           125,020	$                   -	$                    -	$                                   -
Dec 31,2023	Remaining Balance	$           69,118,200	$             7,054,700	$      62,063,500	12 Months	$       6,911,820	$ 55,151,680	$                    -	$                                   -

2) Equipment depreciation for 2023 is depreciation of old plus new = $ 6,911,820 + $98,230 = $ 7,010,050