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On January 1, 2010 Apple Company purchased a building in Bartlett for $1,000,000. Apple expected the...

On January 1, 2010 Apple Company purchased a building in Bartlett for $1,000,000. Apple expected the building to last 20 years and have an $80,000 salvage value. Apple uses straight-line depreciation. On January 1, 2018, Apple exchanged this Bartlett building for a building in West Memphis. The West Memphis Building has a fair market value of $670,000. In addition to giving up the building, Apple paid $50,000 in cash. REQUIRED: MAKE THE JOURNAL ENTRY APPLE MADE WHEN IT EXCHANGED THE BARTLETT BUILDING FOR THE WEST MEMPHIS BUILDING.

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Answer #1

Journal Entry for the given transaction:

Building in West memphis A/c. Dr. $ 670000​​

Profit and loss A/c. Dr. $ 12000

   To Barlett Building A/c. $ 632000

To Bank A/c. $ 50000

(Being Barlett Building got exchanged with Building in West memphis)

Note: WDV of Barlett building as on 01.01.2018 :

Depreciation per annum = (Original cost - scrap value)/useful life

   = ($1000000-$80000)/20 = $ 46000

​WDV as on 01.01.2018 = $1000000 - ($46000*8) = $ 632000

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