Solution
Jimenez Enterprises
Jimenez Enterprises |
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Journal Entries |
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Date |
Account Titles and Explanation |
Debit |
Credit |
Apr1, 2020 |
Land |
2,200,000 |
|
Cash |
2,200,000 |
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(To record purchase of land) |
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May 1, 2020 |
Cash |
466,000 |
|
Accumulated Depreciation – Equipment |
325,000 |
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Equipment |
750,000 |
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Gain on Sale of Equipment |
41,000 |
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(To record sale of equipment and resulting gain, (note 1)) |
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June 1, 2020 |
Cash |
1,800,000 |
|
Land |
300,000 |
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Gain on Sale of Land |
1,500,000 |
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(To record sale of land and resulting gain; 1,800,000 – 300,000 = 1,500,000) |
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July 1, 2020 |
Equipment |
2,450,000 |
|
Cash |
2,450,000 |
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(To record purchase of equipment) |
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Dec 31, 2020 |
Accumulated Depreciation – Equipment |
500,000 |
|
Equipment |
500,000 |
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(To record equipment retired) |
Adjusting entries for depreciation for 2020:
Jimenez Enterprises |
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Adjusting Entries |
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Date |
Account Titles and Explanation |
Debit |
Credit |
|
Dec 31, 2020 |
Depreciation Expense – Equipment |
25,000 |
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Accumulated Depreciation – Equipment |
25,000 |
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(To record depreciation on equipment sold on May 1; 75,000 x 4/12 = 25,000 (note 1)) |
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Dec 31, 2020 |
Depreciation Expense – Equipment |
122,500 |
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Accumulated Depreciation - Equipment |
122,500 |
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(To record depreciation on equipment purchased on July 1; 2,450,000 x 1/10 years x 6/12 months = 122,500 (note 2)) |
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Dec 31, 2020 |
Depreciation Expense – Equipment |
50,000 |
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Accumulated Depreciation - Equipment |
50,000 |
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(To record depreciation on equipment retired; 500,000 x 1/10 = 50,000) |
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Dec 31, 2020 |
Depreciation Expense – Buildings |
530,000 |
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Accumulated Depreciation Buildings |
530,000 |
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(To record depreciation expense on buildings; 26,500,000/50 years = 530,000) |
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Dec 31, 2020 |
Depreciation Expense - Equipment |
3,997,500 |
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Accumulated Depreciation |
3,997,500 |
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(To record depreciation on balance in equipment account; (note 3)) |
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Notes:
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
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
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
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 |
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Plant Assets Section of Jimenez's statement of financial position at December 31, 2020 |
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Plant Assets |
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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
can anyone help me to solve p9.5 2022 Instruc 2023 a. Prep 2024 b. Prep c....
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