Question

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Problem 7-4

At January 1, 2017, Sunland Company reported the following property, plant, and equipment accounts:

Accumulated depreciation—buildings

$63,750,000

Accumulated depreciation—equipment

52,750,000

Buildings

97,400,000

Equipment

150,450,000

Land

20,650,000

The company uses straight-line depreciation for buildings and equipment, its year-end is December 31, and it makes adjustments annually. The buildings are estimated to have a 40-year useful life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value.

During 2017, the following selected transactions occurred:

Apr. 1

Purchased land for $4.30 million. Paid $1.075 million cash and issued a 3-year, 6% note payable for the balance. Interest on the note is payable annually each April 1.

May 1

Sold equipment for $290,000 cash. The equipment cost $3.72 million when originally purchased on January 1, 2009.

June 1

Sold land for $5.88 million. Received $660,000 cash and accepted a 3-year, 5% note for the balance. The land cost $1.70 million when purchased on June 1, 2011. Interest on the note is due annually each June 1.

July 1

Purchased equipment for $2.20 million cash.

Dec. 31

Retired equipment that cost $1 million when purchased on December 31, 2007. No proceeds were received.

Answer 1

	assets															=	Liabilities			+	Stockholders’ equity
																							Retained earnings
	Cash	+	Notes rec.	+	Interest rec.	+	land	+	buidings	-	Accum. Dep. - buildings	+	equipment	-	Accum. Dep. – equip.	=	Interest payable	+	Notes pyable	+	Common stock	+	revenue	-	expenses	-	dividend
Jan. 1							20650000		97400000		63750000		150450000		52750000
Apr. 1	-1075000						4300000												3225000
May 1																124000										124000
May 1	290000												-3720000			2976000										330000
June 1	660000		5220000				-1700000																4180000
July 1	-22000000												22000000
Dec. 31																100000										100000
Dec. 31													-1000000			-1000000
Dec. 31											243500															243500
Dec. 31															14683000											14683000
Dec. 31																	145125									145125
					152250																		152250

3720000/10*4/12= 124000

3720000/10*8 = 2976000

Loss on sale of equipment = book value – sale price = (3720000-2976000-124000)-290000 = 330000

Notes receivable = 5880000-660000 = 5220000

Depreciation on buildings = 9740000/40 = 2435000

Depreciation on equipment = ((150450000-3720000-1000000)/10)+(2200000/10*6/12) = 14683000

Interest expense = 3225000*6%*9/12 = 145125

Interest revenue = 5220000*5%*7/12 = 152250

Part B

SUNLAND COMPANY Statement of Financial Position (Partial) December 31, 2017
Property, plant, and equipment
Land		23250000
Buildings	97400000
Less: accumulated depreciation	63993500	33406500
Equipment	167730000
Less: accumulated depreciation	67433000	100297000
Total property, plant, and equipment		156953500