Kingbird Ltd. owned several manufacturing facilities. On September 15 of the cur

Question

Kingbird Ltd. owned several manufacturing facilities. On September 15 of the current year, Kingbird decided to sell one of its manufacturing buildings. The building had cost $6,450,000 when originally purchased 6 years ago, and had been depreciated using the straight-line method with no residual value. Kingbird estimated that the building had a 25 year life when purchased.

(a)

Date

Account Titles and Explanation

Debit

Credit

Sept. 15

Kingbird Ltd. owned several manufacturing facilities. On September 15 of the current year, Kingbird decided to sell one of its manufacturing buildings. The building had cost $6,450,000 when originally purchased 6 years ago, and had been depreciated using the straight-line method with no residual value. Kingbird estimated that the building had a 25 year life when purchased.

Explanation / Answer

Particulars $ Cost of the Building 6450000 Life of the Building 25 Depreciation per Year (6450000/25) 258000 Total Depreciation for six years (258000*6) 1548000 Book Value of the Building (6450000-1548000) 4902000 Building Sold for 5042000 Profit on sale of Building (5042000-4902000) 140000 Date Account Title and Explanation Debit Credit 15-Sep Cash 5042000 Accumulated Depreciation 1548000 Building Asset 6450000 Gain on Building Disposal 140000

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