Question
Crane Company purchased land and a building on April 1, 2019, for $374,400. The company paid $111,600 in cash and signed a 5% note payable
Crane Company purchased land and a building on April 1, 2019, for $374,400. The company paid $111,600 in cash and signed a 5% note payable for the balance. At that time, it was estimated that the land was worth $147,000 and the building, $227,400. The building was estimated to have a 25-year useful life with a $36,000 residual value. The company has a December 31 year end, prepares adjusting entries annually, and uses the straight-line method for buildings; depreciation is calculated to the nearest month. The following are related transactions and adjustments during the next three years.
2019 | ||
Dec. 31 | Recorded annual depreciation. | |
31 | Paid the interest owing on the note payable. | |
2020 | ||
Feb. 17 | Paid $235 to have the furnace cleaned and serviced. | |
Dec. 31 | Recorded annual depreciation. | |
31 | Paid the interest owing on the note payable. | |
31 | The land and building were tested for impairment. The land had a recoverable amount of $117,800 and the building, $237,000. | |
2021 | ||
Jan. 31 | Sold the land and building for $314,000 cash: $112,000 for the land and $202,000 for the building. | |
Feb. 1 | Paid the note payable and interest owing. |
Date Account Titles and Explanation Debit Credit Jan. 31 Depreciation Expense Accumulated Depreciation - Building (To record depreciation) Jan. 31 Cash Impairment Loss Accumulated Depreciation - Equipment (To record disposal) LLL LLL || LINE Feb. 1 (To record payment of note)
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