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Gretta Chung Associates

Price: $2.50

P9-29A Lump sum asset purchases, partial year depreciation, and impairments
[20–25 min]

Gretta Chung Associates surveys American eating habits. The company’s accounts
include Land, Buildings, Office equipment, and Communication equipment, with a
separate accumulated depreciation account for each asset. During 2012 and 2013,
Gretta Chung completed the following transactions:

Traded in old office equipment with book value of $40,000 (cost of $132,000
and accumulated depreciation of $92,000) for new equipment. Chung also
paid $80,000 in cash. Fair value of the new equipment is $119,000.

Acquired land and communication equipment in a group purchase. Total
cost was $270,000 paid in cash. An independent appraisal valued the land
at $212,625 and the communication equipment at $70,875.

Sold a building that cost $555,000 (accumulated depreciation of $255,000
through December 31 of the preceding year). Chung received $370,000
cash from the sale of the building. Depreciation is computed on a
straight-line basis. The building has a 40-year useful life and a residual
value of $75,000.

Recorded depreciation as follows:
Communication equipment is depreciated by the straight-line method over a
five-year life with zero residual value.
Office equipment is depreciated using the double-declining-balance method over
five years with $2,000 residual value.

The company identified that the communication equipment suffered significant
decline in value. The fair value of the communication equipment was
determined to be $55,000.

1. Record the transactions in the journal of Gretta Chung Associates.

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