Question

can anyone help me to solve p9.5

2022 Instruc 2023 a. Prep 2024 b. Prep c. Prep P9.5 (LO 2, 3, 5) At December 31, 2019, Jimenez Enterprises reported the following as plant assets. € 3,000,000 14.400,000 Land Buildings Less: Accumulated depreciation-buildings Equipment Less: Accumulated depreciation equipment Total plant assets €26,500,000 12,100,000 40,000,000 5,000,000 P9.8 (LO intangibl. 1. Bue men €60 tion 2. On J Buel good 35,000,000 €52,400,000 During 2020, the following selected cash transactions Aprill Purchased land for €2.200.000 May 1 Sold equipment that cost €750,000 when purchased on January 1, 2016. The equipment was sold for €466,000. June | Sold land purchased on June 1, 2010 for €1,800,000. The land cost €300,000. July 1 Purchased equipment for €2,450,000. Dec. 31 Retired equipment that cost €500,000 when purchased on December 31, 2010. No residual value was received. Instructi Prepare all yet beend P9.9 (LO involved i straight-lin Instructions a. Journalize the above transactions. The company uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 50-year life and no residual value. The equipment is estimated to have a 10-year useful life and no residual value. Update depreciation on assets dis- posed of at the time of sale or retirement. b. Record adjusting entries for depreciation for 2020. c. Prepare the plant assets section of Jimenez's statement of financial position at December 31, 2020 Instruction .. For eac b. Based in using 1.6 (L03) Yount Towing has equipment that cost €50,000 and that has been depreciated €22.000 Instructions Record the disposal under the following assumptions, It was scrapped as having no value. Sempre!

Answer 1

Solution

Jimenez Enterprises

Jimenez Enterprises
Journal Entries
Date	Account Titles and Explanation	Debit	Credit
Apr1, 2020	Land	2,200,000
	Cash		2,200,000
	(To record purchase of land)
May 1, 2020	Cash	466,000
	Accumulated Depreciation – Equipment	325,000
	Equipment		750,000
	Gain on Sale of Equipment		41,000
	(To record sale of equipment and resulting gain, (note 1))
June 1, 2020	Cash	1,800,000
	Land		300,000
	Gain on Sale of Land		1,500,000
	(To record sale of land and resulting gain; 1,800,000 – 300,000 = 1,500,000)
July 1, 2020	Equipment	2,450,000
	Cash		2,450,000
	(To record purchase of equipment)
Dec 31, 2020	Accumulated Depreciation – Equipment	500,000
	Equipment		500,000
	(To record equipment retired)

Adjusting entries for depreciation for 2020:

Jimenez Enterprises
Adjusting Entries
Date	Account Titles and Explanation	Debit	Credit
Dec 31, 2020	Depreciation Expense – Equipment	25,000
	Accumulated Depreciation – Equipment		25,000
	(To record depreciation on equipment sold on May 1; 75,000 x 4/12 = 25,000 (note 1))
Dec 31, 2020	Depreciation Expense – Equipment	122,500
	Accumulated Depreciation - Equipment		122,500
	(To record depreciation on equipment purchased on July 1; 2,450,000 x 1/10 years x 6/12 months = 122,500 (note 2))
Dec 31, 2020	Depreciation Expense – Equipment	50,000
	Accumulated Depreciation - Equipment		50,000
	(To record depreciation on equipment retired; 500,000 x 1/10 = 50,000)
Dec 31, 2020	Depreciation Expense – Buildings	530,000
	Accumulated Depreciation Buildings		530,000
	(To record depreciation expense on buildings; 26,500,000/50 years = 530,000)
Dec 31, 2020	Depreciation Expense - Equipment	3,997,500
	Accumulated Depreciation		3,997,500
	(To record depreciation on balance in equipment account; (note 3))

Notes:

1. Calculation of depreciation expense gain on sale of equipment sold on May 1, 2020:

Cost of equipment sold = 750,000

Accumulated depreciation for 4 years 4 months, when useful life is 10 years,

Annual depreciation = 750,000 x 1/10 years = 75,000

Accumulated depreciation, 4 years = 4 x 75,000 = 300,000

Depreciation expense for 4 months till date of sale = 75,000 x 4/12 = 25,000

Accumulated depreciation till date of sale = 300,000 + 25,000 = 325,000

Gain on sale = sale proceeds – book value

Book value = cost – accumulated depreciation

= 750,000 – 325,000 = 425,000

Gain on sale = 466,000 – 425,000 = 41,000

2. Calculation of depreciation expense on equipment purchased on July 1, 2020:

Cost of equipment = 2,450,000

Useful life = 10 years

Depreciation in 2020 = 6 months (July through December)

Depreciation expense = 2,450,000 x 1/10 x 6/12 = 122,500

3. Calculation of depreciation expense on balance in equipment account:

Equipment account balance as on Dec 31, 2020 –

Beginning balance = 40,000,000

Less: equipment sold (750,000)

Add: equipment purchased 2,450,000

Less: equipment retired (500,000)

Balance as on December 31, 2020     41,200,000

Depreciation expense = 41,200,000/10 = 4,120,000

Less: depreciation already recorded on purchased equipment, 122,500

Depreciation expense on balance in equipment account = 3,997,500

4. Accumulated Depreciation - Equipment balance as on December 31, 2020:

Beg. Balance 5,000,000

Add: current year depreciation expense –

On equipment sold 25,000

On equipment retired 50,000

On equipment purchased 122,500

On balance in equipment account 3,997,500

Total                9,195,000

Less: accumulated depreciation on equipment sold (325,000)

Less: accumulated depreciation on equipment retired (500,000)

Accumulated depreciation – Equipment, December 31, 2020 = 8,370,000

Plant Assets Section of Jimenez Enterprises balance sheet as on December 31, 2020:

Jimenez Enterprises
Plant Assets Section of Jimenez's statement of financial position at December 31, 2020
Plant Assets
Land		4,900,000
Buildings	26,500,000
Less: accumulated depreciation - Buildings	12,630,000	13,870,000
Equipment	41,200,000
Accumulated Depreciation - Equipment	8,370,000	32,830,000
Total Plant Assets		51,600,000

                                                                               

Computations:

Land –

Beg. Balance 3,000,000

Add: purchased 2,200,000

Less: sold (300,000)

Ending balance 4,900,000

Buildings – Accumulated Depreciation balance

Beg. Balance 12,100,000

Add: current year depreciation – buildings 530,000

Ending balance = 12,630,000