At December 31, 1996, Jerry Hamsmith Corporation reported the following as plant assets.

During 1997, the following selected cash transactions occurred:
April 1 Purchased land for \(\$ 2,200,000\).
May 1 Sold equipment that cost \(\$ 600,000\) when purchased on January 1, 1993. The equipment was sold for \(\$ 350,000\).
June 1 Sold land purchased on June 1, 1987 for \(\$ 1,800,000\). The land cost \(\$ 500,000\).
July 1 Purchased equipment for \(\$ 1,200,000\).
Dec. 31 Retired equipment that cost \(\$ 500,000\) when purchased on December 31,1987 . No salvage value was received.
\section*{Instructions}

(a) Journalize the above transactions. (Hint: You may wish to set up "T" accounts, post beginning balances and then post 1997 transactions.) Hamsmith uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 40 year useful life and no salvage value; the equipment is estimated to have a 10 -year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement.

(b) Record adjusting entries for depreciation for 1997.

(c) Prepare the plant asset section of Hamsmith's balance sheet at December 31, 1997.

Transcribed Image Text:

Land Buildings Less: Accumulated depreciation-buildings Equipment Less: Accumulated depreciation-equipment Total plant assets $ 3,000,000 $26,500,000 12,100,000 14,400,000 40,000,000 5,000,000 35,000,000 $52,400,000