You are engaged in the audit of the financial statements of ABC Corporation for the year ended December 31, 2016. The accompanying analyses of the Property, Plant, and Equipment and related accumulated depreciation accounts have been prepared by the chief accountant of the client. You have traced the beginning balances to your prior year's audit working papers. ABC Corporation Analysis of Property, Plant, and Equipment And Related Accumulated Depreciation Accounts Year Ended Dec. 31, 2016 Plant Assets Retirements Description Land Bldgs M/C & Eqp Total Final 12/31/15 450,000 200,000 385,000 927,500 Additions 150,000 25,000 40,400 65,400 Per-Ledger 12/31/16 600,000 225,000 400,400 1,225,400 25,000 25,000 Accumulated Depreciation Retirements Description Bldgs M/C & Eqp Total Final 12/31/15 100,000 173,250 273,250 Additions 8,500 39,220 47,720 Per-Ledger 12/31/16 108,500 212,470 320,970 All plant assets are depreciated on the straight-line basis (no residual value taken into consideration based on the following estimated service lives: building, 25 years; all other items, 10 years. The company's policy is to take one half-year's depreciation on all asset additions and disposals during the year. Your audit revealed the following information: The company completed the construction of a wing on the plant building on June 30. The service life of the building was not extended by this addition. The lowest construction bid received was $25,000, the amount recorded in the Buildings account. Company personnel constructed the addition at a cost of $22,000 (materials, $11,000; labor, $8,000; and overhead, $3,000). The amount shown in the machinery and equipment asset retirement column represents cash received on September 5 upon disposal of a machine purchased in July 2012 for 548,000. The chief accountant recorded depreciation expense of $3,500 on this machine in 2016. Harbor City donated land and a building appraised at $200,000 and $500,000, respectively, to ABC Corporation for a plant. On September 1, the company began operating the plant. Since no costs were involved, the chief accountant made no entry for the above transaction. Required: Prepare the adjusting journal entries that you would propose at December 31, 2016, to adjust the accounts for the above transactions. Disregard income tax implications. The accounts have not been closed. Computations should be rounded off to the nearest dollar. Use a separate adjusting journal entry for each of the preceding four paragraphs. (AICPA, adapted)
