Acquisition, Depreciation, and Disposal of Assets On January 2, 2012, Dickens Co
ID: 2502394 • Letter: A
Question
Acquisition, Depreciation, and Disposal of Assets
On January 2, 2012, Dickens Company purchased a building and land for $740,000. The most
recent appraisal values for the building and the land are $520,000 and $280,000, respectively. The
building has an estimated useful life of 20 years and a salvage value of $60,000.
Required:
1. Assuming cash transactions and straight-line depreciation, prepare journal entries to
record:
a. Purchase of the building and land on January 2, 2012
b. Depreciation expense on December 31, 2012
2. Assume that after four years the property (land and building) was sold for $585,000.
Prepare the journal entry to record the sale.
Explanation / Answer
DR Building 481,000
DR Land 259,000
CR Mortgage Payable 740,000 (I assume, the problem doesn't say how it was financed)
DR Depreciation expense 21,050
CR Accumulated Depreciation 21,050
DR Cash 585,000
DR Accumulated Depreciation 84,200
DR Loss on sale 70,800
CR Building 481,000
CR Land 259,000
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