Question

Journal Entries for Plant Assets During the first few days of the year, Coast Company entered into the following transactions: 1 Purchased a parcel of land with a building on it for $900,000 cash. The building, which will be used in operations, has an estimated useful life of 25 years and a salvage value of $60,000. The assessed valuations for property tax purposes show the land at $80,000 and the building at $720,000. 2 Paid $31,200 for the construction of an asphalt parking lot for customers. The parking lot is expected to last 12 years and has no salvage value. 3 Paid $25,000 for the construction of a new entrance to the building. 4 Purchased store equipment, paying the invoice price (including seven percent sales tax) of $78,760 in cash. The estimated useful life of the equipment is eight years, and the salvage value is $6,000. 5 Paid $240 freight on the new equipment. 6 Paid $1,650 to repair damages to floor caused when the store equipment was accidentally dropped as it was moved into place. 7 Paid $55 for an umbrella holder to place inside front door (customers may place wet umbrellas in the holder). The holder is expected to last 20 years. Required a. Prepare journal entries to record these transactions. b. Prepare the December 31 journal entries to record depreciation expense for the year. Double-declining balance depreciation is used for the equipment, and straight-line depreciation is used for the building and parking lot. Transactions Depreciation Credit Debit 30,000 x 0 30,000 x General Journal Date Description Dec.31 Depreciation Expense - Building Accumulated Depreciation - Building To record depreciation on building. Dec.31 Depreciation Expense - Land Improvements Accumulated Depreciation - Land Improvements To record depreciation on parking lot. Dec.31 Depreciation Expense - Store Equipment Accumulated Depreciation - Store Equipment To record depreciation on store equipment. 2,600 0 2,600 19,750 0 19,750

Answer 1

Understanding: Based on the inputs given (Question) it was understood the Transactional Journal Entries were written. Further, entries for Depreciation shows Green Tick (i.e, the Answer is correct) for Land Improvements (Parking Lot) and Store Equipments. Hence, the below Answer is given only for the Building part.

Inputs: Serial No. 1 & 3 related to Builing. For the purpose of Accounting the assessed values are irrelevant. Actual Cost spent for purchase of Land and Building is relevant. Hence as per Sr. No. 1, an amount of $900,000 is the value of Land and Building bought. Further the additional cost incurred for new entrance to the building is $25,000.

1. Total Cost of Land and Building = $ 925,000

2. Salvage Value = $ 60,000

3. Useful Life = 25 Years

4. Depreciation method = Straight-line

===> Depreciation = [$925,000 - $60,000] / 25 Years = $34,600

Entry as on Dec. 31:

Debit : Depreciation Expenses - Land & Building $34,600

Credit: Accumulated Depreciation - Land & Building $34,600

[To record Depreciation on Building].