{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# Based on the 820000 beginning balance in the

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: le Y D e p r. E.B. 100,000 X = Cost of building sold = \$130,000 Y = Accumulated depreciation on building sold = \$20,000 Case 2: Based on the \$380,000 beginning balance in the Equipment account and the sale during 2012 of equipment that originally cost \$50,000, one would expect the Equipment account to have a balance at the end of 2012 of \$330,000. The fact that its balance is \$500,000 implies that Webb Industries must have purchased some equipment for \$170,000. Similarly, based on the beginning balance of \$85,000 in the Accumulated Depreciation: Equipment account and the \$15,000 of depreciation taken on the equipment during 2012, one would expect the Accumulated Depreciation: Equipment account to have a balance at the end of 2012 of \$100,000. The fact that its balance is only \$75,000 implies that the accumulated depreciation associated with the equipment that Webb Industries sold during 2012 must have been \$25,000. This information is summarized in the following T accounts. P14–8 Continued B.B. 85,000 Purchase Depr. Exp. E.B. 75,000 Equipment 380,000 X 15,000 Accumulated Depreciation B.B. Sale 50,000 500,000 Sale Y E.B. X = Cost of equipment purchased = \$170,000 Y = Accumulated depreciation on equipment sold = \$25,000 Case 3: Based on the \$250,000 beginning balance in the Land account and the sale of land during 2012, one would expect the balance in the Land account to decrease. The fact that its balance is still \$250,000 at the end of 2012 implies that (1) Webb Industries must have purchased some land during 2012 and (2) the cost of the land purchased exactly equaled the original cost of the land that was sold. Since a gain on the sale of land equals the excess of the proceeds over the cost of the land, it can be inferred that the land that Webb Industries sold during 2012 originally cost \$225,000 (i.e., proceeds of \$300,000 less gain of \$75,000). Thus, the cost of the land that Webb Industries purchased during 2012 was \$225,000. This information is summarized in the following T account. B.B. Purchase E.B. Y = Cost of land purchased = \$225,000 Land 250,000 Y Sale X 250,000 X = Cost of land sold = \$225,000 Case 4: In exchange between two independent parties, one would expect the fair mark...
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern