Page 471 - Accounting Principles (A Business Perspective)

11. Plant asset disposals, natural resources, and intangible assets

Machinery (new) (+A) 39,000
Accumulated Depreciation—Machinery (+A) 19,950
Loss from Disposal of Plant Asset (-SE) 1,050
Machinery (old) (-A) 36,000
Cash (-A) 24,000
To record exchange of machines.
The exchange has commercial substance.
Receivable from Insurance Company (+A) 10,800
Accumulated Depreciation—Machinery (+A) 19,950
Fire Loss (-SE) 5,250
Machinery (-A) 36,000
To record loss of machinery.

Solution to demonstration problem B
a. Land (+A) 3,200,00
Timber Stands (+A) 0
Cash (-A) 4,800,00 8,000,00
To record purchase of land and timber. 0 0
b. Timber Stands (+A) 800,000
Cash (-A) 800,000
To record costs of development of the site.
c. Depletion (-SE) 1,792,00
Accumulated Depletion—Timber Stands (-A) 0 1,792,00
To record depletion for 2007. 0
($4,800,000 + $800,000/50,000,000 = $0.112 per
board foot.
$0.112 X 16,000,000 = $1,792,000.)
d. Depreciation Expense—Buildings (-SE) 25,600
Accumulated Depreciation—Buildings (-A) 25,600
To record depreciation expense:
($160,000 - $80,000)/50,000,000 board feet = $0.0016
per board foot.
$0.0016 X 16,000,000 = $25,600.
Solution to demonstration problem C
a. Leasehold (+A) 30,000
Cash (-A) 30,000
To record purchase of sublease on warehouse.
b. Rent Expense (-SE) 6,000
Cash (-A) 6,000
To record annual rent payment.
c. Leasehold Improvements (+A) 20,000
Cash (-A) 20,000
To record payment for leasehold improvements.
d. Rent Expense(-SE) 3,000
Leasehold (-A) 3,000
To record leasehold amortization for 2007:
Annual amortization = $30,000/10 years
= $3,000
e. Rent Expense (-SE) 2,000
Leasehold Improvements (+A) 2,000
To amortize leasehold improvements:
Annual amortization = $20,000/10years
= $2,000

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