Acquisition, Depreciation, and Disposal of Assets

On January 2, 2012, Dickens Company purchased a building and land for $740,000. The most recent appraisal values for the building and the land are $520,000 and $280,000, respectively. The building has an estimated useful life of 20 years and a salvage value of $60,000.

Required:

1. Assuming cash transactions and straight-line depreciation, prepare journal entries to record:

a. Purchase of the building and land on January 2, 2012

b. Depreciation expense on December 31, 2012

2. Assume that after four years the property (land and building) was sold for $585,000.

Prepare the journal entry to record the sale.