At December 31, 2022, Martinez Corporation reported the following plant assets. Land $3,783,000 Buildings Less: Accumulated…
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Question “At December 31, 2022, Martinez Corporation reported the following plant assets. Land $3,783,000 Buildings Less: Accumulated…”
Answer
Solution
Martinez Company
- Journal Entries
Martinez Company | ||||
Journal Entries | ||||
Date | Account Titles and Explanation | Ref. No. | Debit | Credit |
1-Apr-23 | Land | $2,774,200 | ||
Cash | $2,774,200 | |||
(To register land purchase) | ||||
1-May-23 | Cash | $214,370 | ||
Accumulated depreciation – Equipment | $554,840 | |||
Sell Equipment and Get a Discount | $12,610 | |||
Equipment | $756,600 | |||
Record sales of equipment and gains on sale | ||||
1-Jun-23 | Cash | $2,017,600 | ||
Land Sales: Gains | $756,600 | |||
Land | $1,261,000 | |||
(To record land sale and gain on sale | ||||
1-Jul-23 | Equipment | $1,387,100 | ||
Cash | $1,387,100 | |||
(To track equipment purchases) | ||||
31-Dec-23 | Accumulated depreciation – Equipment | $882,700 | ||
Equipment | $882,700 | |||
(To retire record equipment) |
Equipment sold after May 1, 2023 is subject to depreciation
Depreciation expense – Equipment Dr 25,220
Accumulated depreciation – Equipment Cr $25,220
(To depreciate equipment purchased on May 1, 2002, 2023)
Computations:
- Equipment sold May 1, 2023
Purchase date – Jan 1, 2016
Cost: $756,600
Life expectancy = 10 years
Depreciation in 2016/2017, 2018, 2019, 2020 and 4 months 2022
Annual depreciation assuming straight line method = $756,600/10 = $75,660
Accumulated Depreciation for the Period 2016-May 1, 2023; 7 Years 4 Months = (7 x 75,660) + ($75,000.660 x 4/12).
Accumulated Depreciation = 529620 + 25,220 = $554840
Equipment sold at a book value = 756,600 – 554,840 = $201,760
Sale proceeds = $214,370
Gain on equipment sale = 214370 – 201760 = $12610
- Gain or loss in land sales on June 1, 2023
Cost: $1,261,000
Sale = $2,017,600
Gain on land sale = $756,600
- Equipment purchased after July 1st is subject to depreciation
Cost = $1,387.100
straight line depreciation
Life expectancy = 10 years
Depreciation expense for 6-month period, July 1, 2023 to December 31, 2023
= $1,387.100/10 x $6/12 = $69.355
- Equipment that will be retired by December 31, 2023
Date of purchase = December 31, 2013.
Cost: $882,700
Annual depreciation = $882 700/10 years = $88,270
Accumulated Depreciation as of Dec 31, 2023 = 882,700 x 10 Years = 88270
The equipment has been fully depreciated.
- Section Plant assets of the balance sheet, December 31, 2023
Martinez Company | ||
Balance Sheet (Partial). | ||
As of December 31, 2023 | ||
Equipment, Plant and Property | ||
Land | $5,296,200 | |
Buildings | $26,590,000 | |
Accumulated depreciation – Buildings | $15,702,175 | $10,887,825 |
Equipment | $50,187,800 | |
Equipment: Less Accumulated Decreciation | $5,050,305 | $45,137,495 |
Total Plant Assets | $61,321,520 | |
Computations:
- Land –
Beg. Balance = $3.783,000
Add: Purchases = $2,774,200
Less: sale = ($1,261,000)
Ending balance = $5.296,200
- Equipment
Beg. Balance = 50.440,000
Equipment sold = (756 600)
Equipment retired = (882 700)
Add: Equipment bought = $1,387,000.100
Ending balance = 50,187,800
Accumulated depreciation – Equipment
Beg. Balance = 6,305,000
Add: Depreciation of equipment sold (cost 756,600). $25,220
Add: Equipment depreciation (cost 1,387.100) $69 355
Add depreciation of equipment that has been retired (cost 882 700) $88,270
Total $6,487.845
Equipment sold at $554,840 less accumulated depreciation
Equipment retired less than accumulated depreciation $882,700
Ending balance = $5.050,305
- Buildings
There was no sale or purchase. Therefore, the ending balance equals that of the beginning balance.
Buildings: $26,590,000
Accumulated depreciation –
Beg. Balance = $15,037.425
Add depreciation expense 2023 = $570,000. (26,590,000/40 Years = 664,750).
Ending balance = $15.702,175
- Adjusting entries:
Martinez Company | ||||
Date | Account Titles and Explanation | Ref. No. | Debit | Credit |
31-Dec-23 | Equipment Depreciation expense | $157,625 | ||
Equipment – Accumulated depreciation | $157,625 | |||
(To calculate depreciation of equipment (88,270 + 669,355) | ||||
31-Dec-23 | Depreciation expense – Buildings | $664,750 | ||
Accumulated depreciation – Buildings | $664,750 | |||
26590,000/40 = 664.750 to record the depreciation of buildings | ||||
Conclusion
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