Question

At December 31, 2022, Swifty Corporation reported the following plant assets.

Land				$ 4,353,000
Buildings		$26,720,000
Less: Accumulated depreciation—buildings		17,303,175		9,416,825
Equipment		58,040,000
Less: Accumulated depreciation—equipment		7,255,000		50,785,000
Total plant assets				$64,554,825

During 2023, the following selected cash transactions occurred.

Apr.	1		Purchased land for $3,192,200.
May	1		Sold equipment that cost $870,600 when purchased on January 1, 2016. The equipment was sold for $246,670.
June	1		Sold land for $2,321,600. The land cost $1,451,000.
July	1		Purchased equipment for $1,596,100.
Dec.	31		Retired equipment that cost $1,015,700 when purchased on December 31, 2013. No salvage value was received.

Journalize the transactions. Swifty uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 40-year useful life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Record adjusting entries for depreciation for 2023. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Prepare the plant assets section of Swifty’s balance sheet at December 31, 2023. (Hint: You may wish to set up T accounts, post beginning balances, and then post 2023 transactions.) (List Plant Assets in order of Land, Building and Equipment.)

Answer 1

a)	Date	Account titles and explanation			Debit	Credit
	Apr 1.	Land			3192200
		Cash				3192200
		(Purchased Land)
	May 1.	Depreciation expense		(Note:1)	29020
		Accumulated depreciation-Equipment				29020
		(Depreciation recorded prior to sale)
	May 1.	Cash			246670
		Accumulated depreciation-equipment (Note:1)			638440
		Equipment				870600
		Gain on sale of equipment		(Balancing figure)		14510
		(Disposal of equipment)
	June 1.	Cash			2321600
		Land				1451000
		Gain on sale of Land		(Balancing figure)		870600
		(Sale of Land)
	July 1.	Equipment			1596100
		Cash				1596100
		(Purchased equipment)
	Dec 31.	Depreciation expense		(Note:2)	101570
		Accumulated depreciation-Equipment				101570
		(Depreciation recorded prior to retirement)
	Dec 31.	Accumulated depreciation-equipment			1015700
		Equipment				1015700
		(Retired equipment and no proceeds were received)
	Note:1- Accumulated depreciation of equipment sold:
	Original cost=$ 870600
	Acquired on Jan 1,2016
	Useful life=10 years
	Depreciation per year=(Original cost-Salvage value)/Useful life=(870600-0)/10=$ 87060
	Depreciation will be same from 2009 till disposal since straight line method is used
	Depreciation from 2016 to 2022=87060*7=$ 609420
	Depreciation for 2023:
	From Jan 1 to May 1 (For 4 months)=87060*(4/12)=$ 29020
	Accumulated depreciation=609420+29020=$ 638440
	Note:2- Accumulated depreciation of equipment retired:
	Original cost=$ 1015700
	Acquired on Dec 31,2013
	Useful life=10 years
	Depreciation per year=(Original cost-Salvage value)/Useful life=(1015700-0)/10=$ 101570
	Depreciation will be same from 2014 till disposal since straight line method is used
	Depreciation from 2014 to 2022=101570*9=$ 914130
	Depreciation for 2023=$ 101570
	Accumulated depreciation=914130+101570=$ 1015700
b)	Adjusting entry:
	Date	Account titles and explanation			Debit	Credit
	Dec 31.	Depreciation expense			668000
		Accumulated depreciation-Building				668000
		(Note:3)
		(Depreciation recorded for building)
		Depreciation expense			5774980
		Accumulated depreciation-Equipment				5774980
		(Note:4)
		(Depreciation recorded for equipment)
	Note:3
	Original cost=$ 26720000
	Useful life=40 years
	Depreciation per year=(Original cost-Salvage value)/Useful life=(26720000-0)/40=$ 668000
	Note:4
	Depreciation of equipment:
	Cost of equipment eligible for 12 months depreciation and depreciation expense:
					$
	Beginning balance				58040000
	Less:
	Original cost of equipment sold			870600
	Original cost of equipment retired			1015700	1886300
	Cost of equipment eligible for 12 months depreciation				56153700
	Useful life in years				10
	Depreciation expense				5615370
	Cost of equipment eligible for 6 months depreciation and depreciation expense:
	Cost of equipment purchased on July 1=$ 1596100
	Useful life=10 years
	Depreciation expense for 6 months=1596100/10=$ 159610
	Total cost of equipment=56153700+1596100=$ 57749800
	Total depreciation=5615370+159610=$ 5774980
c)		Property,Plant and equipment
					$	$
	Land	(4353000+3192200-1451000)				6094200
	Building				26720000
	Less: Accumulated depreciation			(17303175+668000)	17971175	8748825
	Equipment			(Refer note:4)	57749800
	Less: Accumulated depreciation			(7255000+5774980)	13029980	44719820
	Total plant assets					59562845