Problem 7-4 At January 1, 2017, Wildhorse Co. reported the following property, plant, and equipment accounts: Accumulated depreciation—buildings $61,350,000 Accumulated depreciation—equipment 54,700,000 Buildings 97,200,000 Equipment 150,300,000 Land 20,150,000 The company uses straight-line depreciation for buildings and equipment, its year-end is December 31, and it makes adjustments annually. The buildings are estimated to have a 40-year useful life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value. During 2017, the following selected transactions occurred: Apr. 1 Purchased land for $4.30 million. Paid $1.075 million cash and issued a 3-year, 6% note payable for the balance. Interest on the note is payable annually each April 1. May 1 Sold equipment for $210,000 cash. The equipment cost $3.30 million when originally purchased on January 1, 2009. June 1 Sold land for $5.04 million. Received $750,000 cash and accepted a 3-year, 5% note for the balance. The land cost $1.20 million when purchased on June 1, 2011. Interest on the note is due annually each June 1. July 1 Purchased equipment for $2.00 million cash. Dec. 31 Retired equipment that cost $1 million when purchased on December 31, 2007. No proceeds were received. Prepare a tabular summary that includes the property, plant, and equipment balances as of January 1, 2017. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.)
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Problem 7-4
At January 1, 2017, Wildhorse Co. reported the following property, plant, and equipment accounts:
$61,350,000
Accumulated depreciation—equipment
54,700,000
Buildings
97,200,000
Equipment
150,300,000
Land
20,150,000
The company uses straight-line depreciation for buildings and equipment, its year-end is December 31, and it makes adjustments annually. The buildings are estimated to have a 40-year useful life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value.
During 2017, the following selected transactions occurred:
Apr. 1
Purchased land for $4.30 million. Paid $1.075 million cash and issued a 3-year, 6% note payable for the balance. Interest on the note is payable annually each April 1.
May 1
Sold equipment for $210,000 cash. The equipment cost $3.30 million when originally purchased on January 1, 2009.
June 1
Sold land for $5.04 million. Received $750,000 cash and accepted a 3-year, 5% note for the balance. The land cost $1.20 million when purchased on June 1, 2011. Interest on the note is due annually each June 1.
July 1
Purchased equipment for $2.00 million cash.
Dec. 31
Retired equipment that cost $1 million when purchased on December 31, 2007. No proceeds were received.
Prepare a tabular summary that includes the property, plant, and equipment balances as of January 1, 2017. (If a transaction causes a decrease in Assets, Liabilities or
Assets=Liabilities+Stockholders' Equity
Cash+Notes Rec.+Interest Rec.+Land+Buildings-Accum. Depr. - Bldgs.+Equipment-Accum. Depr. - Equip.=Interest Payable+Notes Payable+Common Stock+Revenue-Expense-Dividend
Jan. 1 $
$
$
$
20,150,000
$
97,200,000
$
-61,350,000
$
150,300,000
$
-54,700,000
$
$
$
$
$
$
SHOW LIST OF ACCOUNTS
Record the above transactions in the tabular summary from part (a). (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.)
Assets=Liabilities+Stockholders' Equity
Retained Earnings
Cash+Notes Rec.+Interest Rec.+Land+Buildings-Accum. Depr. - Bldgs.+Equipment-Accum. Depr. - Equip.=Interest Payable+Notes Payable+Common Stock+Revenue-Expense-Dividend
Jan. 1 $
$
$
$
20,150,000
$
97,200,000
$
-61,350,000
$
150,300,000
$
-54,700,000
$
$
$
$
$
$
Apr. 1
-1075000
4300000
-580500
-3225000
May 1
210,000
210,000
Gain on disposal
May 1
-3090000
Depreciation expense
June 1
750,000
July 1
750,000
Dec. 31
Dec. 31
SHOW LIST OF ACCOUNTS
Record any adjustments required at December 31. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.)
Assets=Liabilities+Stockholders' Equity
Retained Earnings
Cash+Notes Rec.+Interest Rec.+Land+Buildings-Accum. Depr. - Bldgs.+Equipment-Accum. Depr. - Equip.=Interest Payable+Notes Payable+Common Stock+Revenue-Expense-Dividend
Jan. 1 $
$
$
$
$
$
$
$
$
$
$
$
$
$
Apr. 1
May 1
May 1
June 1
July 1
Dec. 31
Dec. 31
Dec. 31
$
$
$
$
Dec. 31
Dec. 31
Dec. 31
SHOW LIST OF ACCOUNTS
Prepare the property, plant, and equipment section of the company’s
WILDHOURSE CO.
Statement od finacial position (partial)
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