Question

Presented in the table below are the balances in the individual property, plant and equipment accounts of Harvest Corporation as of December 31, 2020.

Asset	Cost	Accumulated Depreciations	Useful Life (Years)	Salvage Value	Depreciation Method	Acquisition Date
Land A	$100,000
Building A	250,000	$100,000	25	$0	SL	01/01/11
Building B	380,000	100,000	15	$80,000	SL	01/01/16
Equipment A	120,000	58,560	10	10,000	150% DDB	01/01/18
Equipment B	45,000	9,000	10	3,000	DDB	01/01/20
Total	$895,000	$267,560

INSTRUCTIONS

Record the following transactions and adjusting entries for Harvest Corporation that took place during the year ended December 31, 2021.

1. On January 2, 2021, Harvest exchanged Equipment A for Equipment C  from Autumn Corporation. The fair value of the acquired equipment is $75,000. In addition to giving up Equipment A, Harvest also paid $4,000 cash to Autumn. The exchange has commercial substance. Record the exchange.
2. On September 30, 2021, Harvest sold Equipment B for $30,000 cash.
   1. Record depreciation expense on Equipment B from the beginning of the year through the date of the sale.
   2. Record the sale.
3. On December 30, 2021, Harvest acquired Land B and Building C for a lump sum purchase price of $800,000 cash. The fair value of the land and building on the day of acquisition were $218,500 and $701,500, respectively. Record the acquisition.
4. Record annual depreciation expense for Equipment C, which has as estimated salvage value of $5,000 and useful life of 10 years. Use the 150% declining balance method.
5. Record annual depreciation expense for Building A for the year ending December 31, 2021.
6. Harvest compared the pattern of usage of Building B with the assumptions used to calculate depreciation for Building B. After careful analysis, management estimated that the remaining useful life of the building as of January 1, 2021 was 15 years (5 more than originally expected), but the estimated salvage value was reduced to $40,000. The changes will be considered effective as of January 1, 2021 and should be used to calculate 2021 depreciation expense. Record annual depreciation expense for Building B for the year ending December 31, 2021.

Answer 1

Journal Entries
Date	Particulars		Amount	Amount
02-01-21	Equipment C Account	Dr.	$            75,000
	Equipment A (Accumulated Depreciation) Account		$            58,560
	To Equipment A (Cost) Account			$        120,000
	To Cash/Bank Account			$            4,000
	To Profit and loss Account (Gain on exchange of asset)			$            9,560**
30-09-21	Depreciation Expenses Account	Dr.	$               5,400
	To Equipment B (Accumulated Depreciation) Account			$            5,400
30-09-21	Cash/Bank Account	Dr.	$            30,000
	Equipment B (Accumulated Depreciation) Account	Dr.	$            14,400
	Profit and loss Account (Loss on sale of asset)		$                  600**
	To Equipment B (Cost) Account			$          45,000
30-12-21	Land B Account	Dr.	$          218,500
	Building C Account	Dr.	$          701,500
	To Cash/Bank Account			$        800,000
	To Revaluation Reserve Account			$        120,000**
31-12-21	Depreciation Expenses Account	Dr.	$            15,000
	To Equipment C (Accumulated Depreciation) Account			$          15,000
31-12-21	Depreciation Expenses Account	Dr.	$            10,000
	To Building A (Accumulated Depreciation) Account			$          10,000
31-12-21	Depreciation Expenses Account	Dr.	$            16,000
	To Building B (Accumulated Depreciation) Account			$          16,000

** Balancing Figure

Working Note:

Statement of Fixed Assets
Asset	Cost of the asset	Accumulated Depreciation as on 1 Jan 2021	Depreciation Expenses	Accumulated Depreciation as on 31 Dec 2021	Salvage Value
Land A	$                        100,000	Non Depreciable Asset
Land B	$                        218,500	Non Depreciable Asset
Building A	$                        250,000	$                     100,000	$                           10,000	$                     110,000	$             -
Building B	$                        380,000	$                     100,000	$                           16,000	$                     116,000	$    40,000
Building C	$                        701,500	Other information not available
Equipment A*	$                        120,000	$                        58,560	$                                    -	Asset Transferred
Equipment B	$                           45,000	$                          9,000	$                             5,400	Asset Transferred
Equipment C	$                           75,000	$                                 -	$                           15,000	$                        15,000	$      5,000

* Assuming depreciation till the date of sale is not required to be charged.