Question

*Problem 9-8A a-c (Part Level Submission) At January 1, 2018, Oriole Limited reported the following property, plant, and equipment accounts: Accumulated depreciation-buildings Accumulated depreciation-equipment Buildings Equipment Land $67,700,000 49,400,000 90,500,000 145,400,000 20,900,000 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 May 1 June 1 July 1 Dec. 31 31 Purchased land for $4,310,000. Paid $1,120,000 cash and issued a three-year, 7% mortgage payable for the balance. Interest on the mortgage is payable annually each April 1. Sold equipment for $310,000 cash. The equipment cost $2,602,800 when originally purchased on January 1, 2010. Sold land for $3,765,000. Received $942,600 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. Purchased equipment for $2,200,000 cash. Retired equipment that cost $1,100,000 when purchased on January 1, 2009. No proceeds were received. Tested land for impairment and found that its recoverable value was $20,900,000.

Answer 1

a)
Date	Account Titles & Explanation	Debit	Credit
Apr.1	Land	$      4,310,000.00
	Cash		$          1,120,000.00
	Mortgage Payable		$          3,190,000.00
May.1	Depreciation Expense	$           86,760.00
	Accumulated Depreciation—Equipment		$               86,760.00
	($2,602,800 ÷ 10 × 4/12 = $120,000
	(To record Depreciation Expense)
	Cash	$         310,000.00
	Accumulated Depreciation—Equipment ($2,602,800 ÷ 10 × 8 = 2,080,240 + $86,760	$      2,169,000.00
	Loss on Disposal (balancing)	$         123,800.00
	Equipment		$          2,602,800.00
	(To Record Loss on sale of equipment)
Jun.1	Cash	$         942,600.00
	Notes Receivable	$      2,822,400.00
	Land		$          1,400,000.00
	Gain on Disposal (balancing)		$          2,365,000.00
	(To Record gain on sale of land)
Jul.1	Equipment	$      2,200,000.00
	Cash		$          2,200,000.00
Dec.31	Depreciation Expense ($1,100,000 ÷ 10 )	$         110,000.00
	Accumulated Depreciation—Equipment		$             110,000.00
	(To record Depreciation Expense)
	Accumulated Depreciation—Equipment	$      1,100,000.00
	Equipment		$          1,100,000.00
	To record the retirement of Equipment)
	No Journal entry
	An impairment loss can be recognized only if the historical cost $19,500,000  (20900000-1400000)carried on the balance sheet cannot be recovered and exceeds the fair value of the asset($20,900,000).
	(to record impairment loss)