At January 1, 2014, Hamsmith Corporation reported the following property, plant, and equipment accounts:

Accumulated depreciation—buildings ……………………  $31,100,000

Accumulated depreciation—equipment …………………..   27,000,000

Buildings ………………………………………….................……….    48,700,000

Equipment …………………………………………................………   75,000,000

Land …………………………………………………....................…….   10,000,000

Hamsmith uses straight-line depreciation for buildings and equipment and its fiscal year end is December 31. The buildings are estimated to have a 50-year useful life and no residual value; the equipment is estimated to have a 10-year useful life and no residual value. Interest on the notes is payable or collectible annually on the anniversary date of the issue.

During 2014, the following selected transactions occurred:

Apr. 1 Purchased land for $2.2 million. Paid $550,000 cash and issued a three-year, 6% note for the balance.

May 1 Sold equipment for $150,000 cash. The equipment cost $1.4 million when originally purchased on

January 1, 2006.

June 1 Sold land for $1.8 million. Received $450,000 cash and accepted a three-year, 5% note for the balance.

The land cost $700,000.

July 1 Purchased equipment for $1.1 million cash.

Dec. 31 Retired equipment that cost $500,000 when purchased on December 31, 2004.

Instructions

(a) Record the above transactions.

(b) Record any adjusting entries required at December 31, 2014.

(c) Prepare the property, plant, and equipment section of Hamsmith’s balance sheet at December 31, 2014.

TAKING IT FURTHER 

The owner of Hamsmith suggests the company should start using the revaluation model, not the cost model, for property, plant, and equipment now that it is following IFRS. Comment on this suggestion.