At January 1, 2017, Hamsmith Corporation, a public company, reported the following property, plant, and equipment accounts:

Question:

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 2017, 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, 2009.

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, 2010.

Instructions

(a) Record the above transactions.

(b) Record any adjusting entries required at December 31, 2017.

Taking It Further

The owner of Hamsmith is considering using the revaluation model to account for property, plant, and equipment. What are some reasons to use the revaluation model?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...