Question
Pharoah Company purchased land and a building on April 1, 2019, for $360,000. The company paid $105,600 in cash and signed a 5% note payable
Pharoah Company purchased land and a building on April 1, 2019, for $360,000. The company paid $105,600 in cash and signed a 5% note payable for the balance. At that time, it was estimated that the land was worth $140,000 and the building, $220,000. The building was estimated to have a 25-year useful life with a $32,500 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 $200 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 $111,500 and the building, $230,000. | |
2021 | ||
Jan. 31 | Sold the land and building for $300,000 cash: $105,000 for the land and $195,000 for the building. | |
Feb. 1 | Paid the note payable and interest owing. |
Assume instead that the company sold the land and building on October 31, 2021, for $380,000 cash: $150,000 for the land and $230,000 for the building. Prepare the journal entries to record the sale. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)
Date | Account Titles and Explanation | Debit | Credit |
Oct. 31 | |||
(To record depreciation expense.) | |||
Oct. 31 | |||
(To record disposal.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started