Question

4) Tucker, Inc., has the following plant asset accounts: Land, Buildings, and Equipment, with a separate accumulated depreciation account for each of these except Land. Tucker completed the following transactions: Jan 3 Traded in equipment with accumulated depreciation of $61,000 (cost of $131,000) for similar new equipment with a cash cost of $177,000. Received a trade-in allowance of $76,000 on the old equipment and paid $101,000 in cash, Jun 30 Sold a building that had a cost of $640,000 and had accumulated deprecia- tion of $150,000 through December 31 of the preceding year. Depreciation is computed on a straight-line basis. The building has a 40-year useful life and a residual value of $240,000. Tucker received $125,000 cash and a $360,000 note receivable. Purchased land and a building for a single price of $350,000 cash. An indepen- dent appraisal valued the land at $127,400 and the building at $236,600. Recorded depreciation as follows: Equipment has an expected useful life of eight years and an estimated residual value of 12% of cost. Depreciation is computed on the double-declining-balance method. Depreciation on buildings is computed by the straight-line method. The new building carries a 40 year usefu! life and a residual value equal to 20% Oct 31 Dec 31 & years 121. of 6t0o00 AF Va of its cost. Land Value Required 236 36h Record the transactions in Tucker, Inc.'s journal. I. Total 640,000 61,c00 A Camlated 10,000 (we-) 134,0 deevacation L01 a h L01, (240,000)-50. Rirdul Value 4.G 17

Answer 1

Journal Entries :

Date	Particulars	Dr. ($)	Cr. ($)
Jan-03	New Equipment Dr	177000
	Accumulated Depreciation Dr.	61000
	To Cash		101000
	To Old Equipment		131000
	To Gain on sale of Equipment		6000
Jun-30	P&L Dr	5000
	To Accumulated Depreciation		5000
	Cash Dr.	125000
	Note Receivable Dr.	360000
	Accumulated Depreciation Dr.	155000
	To Building		640000
Oct-31	Land Dr.	127400
	Building Dr.	236600
	To Cash		350000
	To Fair Value Gain		14000
Dec-31	P&L Dr	38940
	To Accumulated Depreciation on Equipment		38940
	P&L Dr	788.67
	To Accumulated Depreciation on Building		788.67

Calculation of Depreciation :
Equipment :
Cost	177000
Residual value (12%)	21240
Useful Life	8	years
Depreciation as per Double Declining Balance Method :
2*(177000-21240)/8	38940
Building:
Cost	236600
Residual Value (20%)	47320
Useful Life	40	years
Depreciation as per SLM : (p.a.)
(236600-47320)/40	4732
For 2 months (Nov-Dec)	788.67