Question

At January 1, 2018, Ivanhoe Limited reported the following property, plant, and equipment accounts: Accumulated depreciation-buildings Accumulated depreciation equipment Buildings $56,600,000 55,000,000 100,600,000 140,500,000 19,700,000 Equipment Land The company uses straight-line depreciation for buildings and equipment, its year end is December 31, and it makes adjusting entries annually. The buildings are estimated to have a 40-year useful life and no residual value; the equipment is estimated to have a 10-year useful life and no residual value. During 2018, the following selected transactions occurred: Apr. 1 May June 1 1 Purchased land for $4,040,000. Paid $1,000,000 cash and issued a three-year, 5% mortgage payable for the balance. Interest on the mortgage is payable annually each April 1. Sold equipment for $270,000 cash. The equipment cost $2,820,000 when originally purchased on January 1, 2010. Sold land for $3,926,900. Received $890,900 cash and accepted a three-year, 5% note for the balance. The land cost $1,500,000 when purchased on June 1, 2012. Interest on the note is due annually each June 1. Purchased equipment for $2,000,000 cash. Retired equipment that cost $1,100,000 when purchased on January 1, 2009. No proceeds were received. Tested land for impairment and found that its recoverable value was $19,700,000. July 1 Dec. 31 31

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Credit Debit $ 4,040,000 JOURNAL ENTRIES IN THE BOOKS - 2018 Date Particulars Apr-01 Land To Cash To 5% Mortgage Note Payable (To record bank borrowing @6% interest) May-01 Depreciation Expenses (2,820,000/10 years* (4months/12 months) To Accumulated Depreciation - Equipment (To record depreciation on Equipment which is sold) $ $ 1,000,000 3,040,000 $ 94,000 $ 2,820,000 $ 94,000 $ 282,000 $ 270,000 NOTE 1 Cost of Equipment on Jan 1, 2010 A Life (Years) Depreciation per year CEA/B Years Elapsed (Jan 1, 2010 to May 1.) 2018 Accumulated depreciation E=C*D Balance in equipment FEA-E Sale Value Loss on Sale of Equipment (Note H=F-G $ $ 2,350,000 200,000 8.33 years $ 2,350,000 $ 470,000 270,000 $ 200,000 $ 2,820,000 May-01 Cash Accumulated Depreciation - Equipment (Note 1) Loss on Sale of Equipment (Note 1) To Equipment (Note 1) (To record sale of equipment and loss on sale Jun-01 Cash 5% Note Receivable To Land To Profit on sale of land (To record sale land and profit on sale) Jul-01 Equipment To Cash (To record purchase of equipment) Dec-31 Accumulated Depreciation - Equipment (Note 2) $ $ 890,900 3,036,000 $ $ 1,500,000 2,426,900 $ 2,000,000 $ 2,000,000 $ 1,100,000 10 110,000 $ 1,100,000 $ To Equipment $ 1,100,000 NOTE 2 Cost of Equipment on Jan 1,2009 A Life (Years) Depreciation per year C=A/B Years Elapsed (Jan 1, 2009 to December 31,2018) Accumulated depreciation E=C*D Balance in equipment F=A-E Sale Value G Impairment Loss (Note 3) H=F-G 10 1,100,000 $ 254,000 (To record retirement of equipmnent without any proceeds received) Dec-31 Impairment Loss (Note 3) To Land (To record impairment loss on land) $ $ $ 254,000

$ 2,515,000 $ 2,515,000 NOTE 3 $ 13,868,000 $ $ 13,868,000 Dec-31 Depreciation Expenses (100,600,000/40 years) To Accumulated Depreciation - Buidling (To record depreciation on building) Dec-31 Depreciation Expenses To Accumulated Depreciation - Equipment (To record depreciation on Equipment except sold eqipment) Dec-31 Interest Expense (3,040,000*5%*(9 months/12 months)] To Interest Payable (To record interest expense) Dec-31 Interest Receivable (3,036,000*5%* (7 months/12 months)] To Interest Revenue (To record interest revenue) Cost of Land on 1-1-2018 Add: New Purchase Less : Sale of Land Closing Balance Recoverable Value Impairment Loss $ $ 19,700,000 4,040,000 1,500,000 22,240,000 19,700,000 2,540,000 $ 114,000 D=A+B-C $ 114,000 $ 19,7 F=D-E $ $ 88,550 $ 88,550 $ 137,680,000 10 C=A/B Note 4 Cost of Equipment on Jan 1, 2008 (except sold) (140,500,000-2,820,000) Life (In years) Depreciation Per Year New Asset purchased on July-1 Life (In years) Depreciation Per Year Depreciation for 6 months (Jluly 1 to Dec 31) Total Depreciation F=D/E G=F*6/12 H=C+G $ 13,768,000 $ 2,000,000 10 $ 200,000 $ 100,000 $ 13,868,000 Ivanhoe Limited Statement of Financial Position (Partial) Assets Land Building Equipment (140,500,000-2,820,000+2,000,000-1,100,000) Accumulated Depreciation - Building (56,600,000+2,515,000) Accumulated Depreciation - Eqquipment (55,000,000+94,000- 2,350,000+13,868,000-1,100,000) $ 1,970,000 $100,600,000 $138,580,000 $-59,115,000 $-65,512,000