Below are three cases related to the depreciation of plant and equipment. In all cases the company has a December 31 year-end. The company records partial depreciation in the year of acquisition or disposal based on the number of months the asset is available for use in the year.
Case A: On March 31, 2011, a machine costing $5,000,000 was acquired. The company estimates that the asset will have an estimated useful life of five years and a residual value of $500,000. On April 1, 2016, the asset is sold for $625,000. The company uses the straight-line method to determine depreciation expense. Prepare the entry to record depreciation expense for 2011, 2012, and all entries required for 2016 as they relate to this asset.
Case B: Same as Case A except the company uses the declining balance method at a rate of 40%.
Case C: Acquired land and building on June 1, 2011 for $16,000,000. An expert in real estate appraisal estimates that the land is worth 55% of the total purchase price. The building is estimated to have a useful life of 25 years and a residual value of $600,000. On September 1, 2021, the company moved and sold the property for $21,000,000. The buyer and seller agreed that 75% of the proceeds should be allocated to land. The company depreciates buildings using the straight-line method. Prepare the entry to record the purchase on June 1, 2011, depreciation expense for 2011 and 2012, and all entries required to record the disposal of the property on September 1, 2021.
Required:
For each case, prepare the journal entries requested.