Lump sum asset purchases, partial year depreciation, and impairments
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:
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2012 Jan 1
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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.
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Apr 1
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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.
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Sep 1
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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.
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Dec 31
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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- eclining-balance method over five years with $2,000 residual value.
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2013 Jan 1
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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.
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Requirement
1. Record the transactions in the journal of Gretta Chung Associates.