At December 31, 2010, Starkey Company reported the following as plant assets:

Land 2,000,000 Buildings $20,000,000 Less: Accumulated Depreciation - Buildings

8,000,000 12,000,000 Equipment 30,000,000 Less: Accumulated Depreciation Equipment 4,000,000 26,000,000 Total plant assets 40,000,000 During 2011, the
following selected cash transactions occurred: Apr 1 Purchased land for $1,200,000
May 1 Sold equipment that cost $420,000 when purchased on January 1, 2007. The
equipment was sold for $240,000 Jun 1 Sold land purchased on June 1, 20001, for
$1,000,000 The land cost was $340,000 Jul 1 Purchased equipment of $1,100,000 Dec
31 Retired equipment that cost $300,000 when purchased on December 31, 2001. No
salvage value was received. Instructions: (a) Journalize the above transactions.
Starkey uses straight-line depreciation for buildings and equipment. The buildings
are estimated to have a 50-year 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. (a) Apr 1 Acct title Amount Acct
title Amount May 1 Acct title Amount Acct title Amount Area for computation Account
title Amount Account title Amount Account title Amount Account title Amount Cost
$750,000 Title Amount Title Formula Title Amount Title Formula Jun 1 Account title
Amount Account title Amount Account title Amount Jul 1 Account title Amount Account
title Amount Dec 31 Account title Amount Account title Amount Area for computation
Dec 31 Account title Amount Account title Amount Title - Area for computation Amount
Title - Area for computation Amount Book value Formula (b) Record adjusting entries for
depreciation for 2011. Dec 31 Account title Amount Account title Amount Area for
computation Dec 31 Account title Amount Account title Amount Title / computation area
Amount Title / computation area Amount Total: Formula (c) Prepare the plant assets
section of Starkey's balance sheet at December 31, 2011. STARKEY COMPANY
Partial Balance Sheet December 31, 2011 Plant Assets Account title Amount Account title
Amount Account title Amount Formula Account title Amount Account title Amount
Formula Total plant assets Formula T Accounts below for illustrative information.
Land Buildings Accumulated Depreciation - Buildings Equipment Accumulated
Depreciation - Equipment
(a)

Apr.

Land ...................................................1,200,000
Cash..........................................................

1,200,000
May

Depreciation Expense.......................................
Accumulated Depreciation
Equipment...........................................

14,000
($420,000 X 1/10 X 4/12)
1

Cash ................................................... 240,000

Accumulated Depreciation

14,000

Equipment.....................................................
Equipment...............................................

182,000

420,000
Gain on Disposal.....................................
2,000
Cost $420,000
Accum. depreciation
equipment
[($420,000 X 1/10 X 4) + $14,000]
Book value
Cash proceeds
Gain on disposal
June

182,000
238,000
240,000
$ 2,000

Cash ...................................................1,000,000
Land.........................................................

340,000
Gain on Disposal.....................................
660,000
July

Equipment.........................................................
Cash..........................................................

1,100,000

Depreciation Expense.......................................
Accumulated Depreciation
Equipment...........................................

30,000

1,100,000
Dec.

31

30,000
($300,000 X 1/10)
31

Accumulated Depreciation
Equipment.....................................................
Equipment...............................................

300,000
Cost $300,000
Accum. depreciation
equipment
($300,000 X 1/10 X 10)
Book value

300,000
$

300,000

(b)

Dec.

31

Depreciation Expense.......................................
Accumulated Depreciation
Buildings..............................................

400,000

400,000
($20,000,000 X 1/50)

31

Depreciation Expense.......................................
Accumulated Depreciation
Equipment...........................................

2,983,000

2,983,000
($29,280,000* X 1/10)
[($1,100,000 X 1/10) X 6/12]

$2,928,000
55,000
$2,983,000

*($30,000,000 $420,000 $300,000)

(c)

STARKEY COMPANY
Partial Balance Sheet
December 31, 2011

Plant Assets*
Land ........................................................................
Buildings.................................................................
Less: Accumulated depreciation
buildings...................................................
11,600,000
Equipment..............................................................
Less: Accumulated depreciation
equipment................................................
23,835,000
Total plant assets..........................................
$38,295,000
*See T-accounts which follow.

$2,860,000
$20,000,000
8,400,000
30,380,000
6,545,000

Bal.
Apr. 1
Bal.

Land
2,000,000 June 1
1,200,000
2,860,000

Bal.
Bal.

Buildings
20,000,000
20,000,000

340,000

Accumulated DepreciationBuildings
Bal.
8,000,000
Dec. 31 adj.
400,000
Bal.
8,400,000

Bal.
July 1
Bal.

Equipment
30,000,000 May 1
1,100,000 Dec. 31
30,380,000

420,000
300,000

Accumulated DepreciationEquipment
May 1
182,000 Bal.
4,000,000
Dec. 31 300,000
May 1
14,000
Dec. 31
30,000
Dec. 31 adj.
2,983,000
Bal.
6,545,000