Journalize long-term asset transactions (Learning Objectives 2, 3, & 5)

20–25 min.

Fidelity Freightway provides freight service. The company’s balance sheet includes Land, Buildings, and Motor-Carrier Equipment. Fidelity Freightway uses a separate accumulated depreciation account for each depreciable asset. During 2014, Fidelity Freightway completed the following transactions:

Jan 1 Jul 1 Oct 31 Dec 31 Traded in motor-carrier equipment with accumulated depreciation of $112,000

(cost of $151,000) for new equipment with a cash cost of $187,000. Fidelity Freightway received a trade-in allowance of $46,000 on the old equipment and paid the remainder in cash.

Sold a building that cost $740,000 and had accumulated depreciation of $360,000 through December 31 of the preceding year. Depreciation is computed on a straight-line basis. The building has a 40-year useful life and a residual value of

$50,000. Fidelity Freightway received $100,000 cash and a $420,000 note receivable.

Purchased land and a building for a cash payment of $700,000. An independent appraisal valued the land at $277,500 and the building at $472,500.

Recorded depreciation as follows:

New motor-carrier equipment has an expected useful life of 1 million miles and an estimated residual value of $27,000. Depreciation method is the units-of-production method. During the year, Fidelity Freightway drove the truck 295,000 miles.

Depreciation on buildings is straight-line. The new building has a 40-year useful life and a residual value equal to $81,000.

Requirement 1. Record the transactions in Fidelity Freightway’s journal.

AppendixLO1