Question

Prblem 7-4 Mery 1, 2017,Ivad C y he fwg pperts piart, ene equpert acnts Amted 200 Acmeddcatn t 350, 700000 150 2,150,000 bdings toe Land The comoeny us streight ne deprecition fer buildings and eqioment, ts year end s December 31, ane t makes adustments ansty The budings are estinted to tve a0w Ourng 2011, the ng antions cured We and no savage a the egmet is emad toave a 30r e and ne sivae veln Prchd nd for $4o Fa $1100 ion cash and ud payable tor be bteret on the e is seyobe ay n Aor 1 Apr1 Ma s 3-e, Spment t $3n h The apment ost 1.30 n whn ongealy hn ary 1, 200 Jne 1 Sold and fer mn Recved $790,00 csh and accpee 3-, %sete tor the belce The nd cet 51.80 Parchaed pnt for $20mtor cah e pree oJne 1, 201 re on the note s de arnaly each une Dec 31 Reted pnet tet cost 1 mton when purchsed on December 31, 2007 No ceets wee receiee h s the pets, pt, bw y 1,201 atrmac c decease Asets L cde uty eatve ige (r parenes) in tnt af the at er frthe partr Ad Lty y f Assa Stecanr tt ned Eamings Acoum eeBigs tepment Cash Land Accum. Depr Eutp.Interest Payable otes Payable Common Stack Buding Expense Aven Dden r e e vw y S t( he (atr e or ecader ety, ee epe er t d of the amnt aned or e part A y y ear wa adeease in Assets di Betened Earings Cen Accm Dep Acm Dearfee tePaya tes PayleConme Steck and udings nt Revenu Expense ividend n Ar Hay De

Answer 1

Ivanhoe Company + + + + + Assets Liabilties Stockholders Equity Retained Earnings Retained Earnings Title Interest Rec Land Buildings - Acc Dep-Bldgs + Equipment - Acc Dep-Equip = Interest Payable Notes Payable + Common Stock + Revenues - Expenses - Dividends $ 20,350,000 $97,600,000 - $ 62,250,000 + $ 150,750,000 - $ 53,850,000 = $ 4,400,000 $ 3,300,000 $ 110,000 = - $ 110,000 Depreciation expense + $ (3,300,000) - $ (2,750,000) = - $ 220,000 Loss on disposal of plant assets $ (1,800,000) + $2,220,000 Gain on disposal of land + $ 2,800,000 - $ 100,000 = - $ 100,000 - Depreciation expense + $ (1,000,000) - $ (1,000,000) = - $ 2,440,000 + - $ 2,440,000 Depreciation expense $ 14,785,000 $ 14,785,000 Depreciation expense = $ 148,500 $ 148,500 Interest expense $ 95,375 + $ 95,375 - Interest revenue Date Cash Notes Rec 1-Jan 1-Apr $(1,100,000) 1-May 1-May $ 330,000 1-Jun $ 750,000 $3,270,000 1-Jul $(2,800,000) 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec + + + + + + + + + + + + + + + + +

Calculations:

Credit Calculation Ivanhoe Company Journal entries Date Account 1-Apr Land Cash Notes Payable Debit $ 4,400,000 $ $ 1,100,000 3,300,000 -4,400,000-1,100,000 $ 110,000 =3,300,000/10 yrs*4/12 1-May Depreciation expense Accumulated Depreciation-Equipment $ 110,000 1-May Cash Accumulated Depreciation-Equipment Loss on disposal of plant assets Equipment $ $ $ 330,000 2,750,000 220,000 =3,300,000/10*8 yrs+110,000 Dep from 2009-2016 for 8 yrs $ 3,300,000 $ $ 750,000 3,270,000 -4,020,000-750,000 1-Jun Cash Notes Receivables Land Gain on disposal of land $ $ 1,800,000 2,220,000 $ 2,800,000 1-Jul Equipment Cash $ 2,800,000 $ 100,000 =1,000,000/10 yrs 31-Dec Depreciation expense Accumulated Depreciation-Equipment $ 100,000 $ 1,000,000 $ 1,000,000 31-Dec Accumulated Depreciation Equipment Equipment Adjusting entries 31-Dec Depreciation expense Accumulated Depreciation-Building $ 2,440,000 =97,600,000/40 $ 2,440,000 $ 14,785,000 31-Dec Depreciation expense Accumulated Depreciation-Equipment =(150,750,000-3,300,000- $ 14,785,000 1,000,000)/10+2,800,000/10*6/12) $ 148,500 31-Dec Interest expense Interest payable =3,300,000*6%*9/12 148,500 9 months from April 1 to Dec 31 $ $ 95,375 31-Dec Interest receivable Interest revenue $ =3,270,000*5%*7/12 95,375 7 months from June 1 to Dec 31