Question

At January 1, 2018, Cullumber Limited reported the following property, plant, and equipment accounts:

Accumulated depreciation—buildings		$62,300,000
Accumulated depreciation—equipment		50,300,000
Buildings		96,100,000
Equipment		150,300,000
Land		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 $4,230,000. Paid $1,080,000 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 $290,000 cash. The equipment cost $2,901,300 when originally purchased on January 1, 2010.
June	1		Sold land for $3,716,300. Received $824,300 cash and accepted a three-year, 5% note for the balance. The land cost $1,400,000 when purchased on June 1, 2012. Interest on the note is due annually each June 1.
July	1		Purchased equipment for $2,100,000 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.

1. Record Journal entry on December 31 for impairment loss

2. Record the adjusting entry for depreciation expense on equipment

3. Prepare the Statement of Financial Position:

CULLUMBER LIMITED Statement of Financial Position (Partial) December 31, 2018 Assets Property, Plant, and Equipment Land Buildings 96100000 Less Accumulated Depreciation - Buildings Equipment Less 1 Accumulated Depreciation - Equipment Total Property, Plant, and Equipment

Answer 1

Cullumber Limited Journal Enteries Date Particulars 1.4.2018 Land a/c Dr. To Cash To Mortgage Payable (Land Purchased) Debit in $ Credit in $ 4230000 1080000 3150000 Statement of Financial Position Property, Plant & Equipment Land Building Less:Accumulated Depreciation Equipment Less:Accumulated Depreciation Total 18100000 96100000 -64702500 31397500 148398700 -61613830 86784870 136282370 1.5.2018 Depreciation Expense a/c Dr. 96710 To Accumulated Depreciation - Equip (To record depreciation) 2901300 / 10 = 290130 X 4/12 = 96710 96710 Cash a/c Dr. 290000 Accumulated Depreciation - Equip a/c Dr. 2417750 Loss on disposal a/c Dr. 193550 To Equipment 2901300 (To record sale of Equipment) Accumulated Depreciation = 290130 x 8 = 2321040 +96710 =2417750 1.6.2018 824300 2892000 Cash a/c Dr. Note Receivable a/c Dr. To Land To Gain on sale of Land (Land sold) 1400000 2316300 1.7.2018 Dr. 2100000 Equipment a/c To Cash (Equipment purchased) 2100000 Dr. 1100000 31.12.2018 Accumulated Depreciation - Equip a/c To Equipment (To record retirement of Machinery) 1100000 31.12.2018 Impairment loss a/c Dr. 2830000 To Land (Land revalued) 18100000 + 4230000 - 1400000 - 18100000 2830000 Adjusting Enteries Date Particulars 31.12.2018 Depreciation Expense a/c Dr. To Accumulated Depreciation - Build (To record depreciation) 96100000 / 40 Debit in $ Credit in $ 2402500 2402500 31.12.2018 Depreciation Expense a/c Dr. 4734870 To Accumulated Depreciation - Equip 14734870 (To record depreciation) 150300000 - 2901300 - 1100000 = 146298700 146298700 / 10 = 14629870 + 105000 = 14734870 2100000 / 10 = 210000 x 6/12 = 105000 141750 31.12.2018 Interest Expense a/c Dr. To Interest Payable (Interest expense accrued) 3150000 x 6% x 9/12 141750 84350 31.12.2018 Interest Receivable a/c Dr. To Interest Revenue (Interest receivable) 2892000 x 5% x 7/12 84350