Question

Question 2 At January 1, 2018, Crane Limited reported the following property, plant, and equipment accounts: Accumulated depreciation-buildings Accumulated depreciation-equipment Buildings Equipment Land $62,800,000 52,600,000 89,700,000 162,600,000 18,100,000 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 Purchased land for $4,830,000. Paid $1,010,000 cash and issued a three-year, 6% mortgage payable for the balance. Interest on the mortgage is payable annually each April 1. May 1 Sold equipment for $300,000 cash. The equipment cost $2,699,400 when originally purchased on January 1, 2010. June 1 Sold land for $3,525,800. Received $831,800 cash and accepted a three-year, 5% note for the balance. The land cost $1,300,000 when purchased on June 1, 2012. Interest on the note is due annually each June 1. July 1 Purchased equipment for $2,300,000 cash. Dec. 31 Retired equipment that cost $1,100,000 when purchased on January 1, 2009. No proceeds were received. 31 Tested land for impairment and found that its recoverable value was $18,100,000.

Answer 1

А B DE Інт к N Adjusting Entries Account Title and Explanation Credit Date Debit Credit Debit $ 48,30,000.00 $ 8,97,00,000.00 2 Date Account Title and Explanation 3 Apr. 1 Land Cash Mortgage Payable $ 22,42,500.00 $ 10,10,000.00 $ 38,20,000.00 40 Building Costs Life Depreciation expense P.a. Dec.31 Depreciation expense- Building Accumulated Depreciation- Building (To record depreciation expense) $ 22,42,500.00 $ 22,42,500.00 $ 89,980.00 7 May.1 Depreciation expense-Equipment Accumulated depreciation- Equipment 9 (To record depreciation expense) Depreciation per year Accumulated Depreciation - 7 Years Depreciation expense for 2018 Total Accumulated depreciation- Equipment $ $ $ $ 2,69,940.00 18,89,580.00 89,980.00 19,79,560.00 $ 89,980.00 $ 1,61,10,060.00 Dec.31 Depreciation expense-Equipment Accumulated depreciation- Equipment (To record depreciation expense) $ 1,61,10,060.00 Equipmet Opening Balance in 2018 Purchased during 2018 Disposed/retired during 2018 Closing Balance at cost Life Depreciation expense P.a. $ 16,26,00,000.00 $ 23,00,000.00 $ -37,99,400.00 $ 16,11,00,600.00 $ 3,00,000.00 $ 19,79,560.00 $ 4,19,840.00 $ 1,71,900.00 11 May.1 Cash Accumulated Depreciation- Equipment Loss on Disposal Equipment (To recognize loss on disposal) 10 Dec.31 Interest Expense Interest Payable (To record Interest expense) $ 1,71,900.00 $ 1,61,10,060.00 $ 26,99,400.00 $ 78,575.00 Dec.31 Interest Receivable Interest Income (To record Interest Income) $ $ 8,31,800.00 $ 26,94,000.00 78,575.00 17 Jun. 1 Cash Note Receivable Land Gain on Disposal (To recognize loss on disposal) $ 13,00,000.00 $ 22,25,800.00 $ 23,00,000.00 $ 23,00,000.00 25 23 Jul. 1 Equipment Cash (To record purchase of equipment) 26 27 Dec.31 Depreciation expense-Equipment Accumulated depreciation- Equipment (To record depreciation expense) Statement of Financial Position (Partial) Dec. 31, 2018 Prperty, plant and Equipment Land $ 1,81,00,000.00 Buildings $ 8,97,00,000.00 Less: Accumulated Depreciation-Building $ 6,50,42,500.00 $ 2,46,57,500.00 Equipmet $ 16,11,00,600.00 Less: Accumulated Depreciation- Equipment $ 6,57,40,500.00 $ 9,53,60,100.00 Total Property, plant and Equipment $ 13,81,17,600.00 $ 1,10,000.00 $ 1,10,000.00 $11,00,000.00 $ 11,00,000.00 31 Dec.31 Accumulated Depreciation- Equipment 32 Equipment 33 (To record the retirement of Equipment) 34 35 Dec.31 Impairment Loss Land 37 Land- Impairment Opening Balance in 2018 Purchased during 2018 Disposed during 2018 Closing Balance at cost Less: Recoverable Value Impairment Loss $ 1,81,00,000.00 $ 48,30,000.00 $ -13,00,000.00 $2,16,30,000.00 $ 1,81,00,000.00 $ 35,30,000.00 $ 35,30,000.00 36 $ 35,30,000.00

A C D E к L M Adjusting Entries Account Title and Explanation Credit Date Debit Credit Debit 4830000 89700000 Date Account Title and Explanation 3 Apr. 1 Land Cash Mortgage Payable =O5 1010000 =C3-04 Dec.31 Depreciation expense- Building Accumulated Depreciation- Building (To record depreciation expense) Building Costs Life Depreciation expense P.a. =K4 =03/04 Equipmet Depreciation per year =2699400/10 Accumulated Depreciation- 7 Years =G6*7 Depreciation expense for 2018 =G6/12*4 Total Accumulated depreciation- Equipmen=SUM(G7:48) 7 May.1 Depreciation expense-Equipment =G8 Accumulated depreciation- Equipmen 9 (To record depreciation expense) 8 =C7 =O13 Dec.31 Depreciation expense-Equipment Accumulated depreciation- Equipment (To record depreciation expense) =K8 10 Opening Balance in 2018 162600000 Purchased during 2018 2300000 Disposed/retired during 2018 --(2699400+1100000) Closing Balance at cost =SUM(08:010) Life Depreciation expense P.a. =011/012 =D5*6%*9/12 11 May.1 Cash 300000 12 Accumulated Depreciation- Equipment =G9 13 Loss on Disposal =D14-C12-C11 Equipment 2699400 15 (To recognize loss on disposal) Dec.31 Interest Expense Interest Payable (To record Interest expense) =K12 =C18*5%*7/12 17 Jun. 1 18 19 =K16 Dec.31 Interest Receivable Interest Income (To record Interest Income) 831800 =3525800-C17 Cash Note Receivable Land Gain on Disposal (To recognize loss on disposal) 1300000 =C17+C18-D19 2300000 23 Jul. 1 24 Equipment Cash (To record purchase of equipment) =C23 =G35 26 Statement of Financial Position (Partial) Dec. 31, 2018 Prperty, plant and Equipment Land Buildings =O3 Less: Accumulated Depreciation- Building =62800000+L5 Equipmet =011 Less: Accumulated Depreciation- Equipment =52600000-C12-C31+C27+L9 Total Property, Plant and Equipment =K26-K27 02 27 Dec.31 Depreciation expense-Equipment 110000 28 Accumulated depreciation- Equipmen 29 (To record depreciation expense) 30 31 Dec.31 Accumulated Depreciation- Equipment 1100000 32 Equipment 33 (To record the retirement of Equipment =K28-29 =SUM(L25:L29) 1100000 Land- Impairment Opening Balance in 2018 Purchased during 2018 Disposed during 2018 Closing Balance at cost Less: Recoverable Value Impairment Loss 18100000 =C3 =-D19 =SUM(G31:G33) 18100000 =G34-G35 34 =G36 35 Dec.31 Impairment Loss Land 37 36 =C35

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