Question

You are engaged in the audit of the financial statements of Holman Corporation for the year ended December 31, 20X6. The accompanying analyses of the Property, Plant, and Equipment and related accumulated depreciation accounts have been prepared by the chief accountant of the client. You have traced the beginning balances to your prior year's audit working papers. HOLMAN CORPORATION Analysis of Property, plant, and Equipment and Related Accumulated Depreciation Accounts Year Ended December 31, 20x6 Final Assets Description 12/31/X5 Additions Retirements Land $431,500 $ 5,600 Buildings 126,000 20,500 Machinery and equipment 391,000 41,600 $ 27,500 $948,500 $ 67,700 $ 27,500 Per Ledger 12/31/X6 $437,100 146,500 405,100 $988,700 Description Buildings Machinery and equipment Final 12/31/X5 $ 63,000 175,950 $238,950 Accumulated Depreciation Additions* Retirements $ 5,450 40,385 $ 45,835 Per Ledger 12/31/X6 $ 68,450 216,335 $ 284,785 *Depreciation expense for the year.

Answer 1

Transaction	General journal	Debit	Credit
A	Gain on Construction of Building (19900-17800)	2100
	Depreciation Expense [working note]	344
	Buildings		2100
	Accumulated Depreciation: Buildings		344
B	Land Improvements	5600
	Depreciation Expense	280
	Land (5600*1/10*1/2)		5600
	Accumulated Depreciation: Land improvements		280
C	Accumulated Depreciation: Machinery and Equipment (20000+1000)	21000
	Loss on Sale of Machinery and Equipment	2500
	Depreciation Expense (3500-2500)		1000
	Machinery and Equipment (balancing figure)[23500-1000]		22500
D	Land	160000
	Buildings	460000
	Depreciation (460000*1/25*1/2)	9200
	Paid-in Capital (Donated Assets)		620000
	Accumulated Depreciation (Building)		9200

working note:

Depreciation Expense (12-year = (17800*1/12*1/2)	742
Per client (on 25-year life) (19900*1/25*1/2)	398
Difference [742-398]	344

Cost		50000
Accumulated Depreciation
for 20X5 (50000/10*3.5 yrs)	17500
For 20X6 (50000*1/10*1/2)	2500	20000
value [50000-20000]		30000
Proceeds of Sale		27500
Loss on Sale [30000-27500]		2500