Question

Below are 3 journal entries relating to Plant Assets.

(1) dr. Plant Assets                 9,000                           (2) dr. Cash                 1,000

cr. Cash                                   9,000                     dr. A/Depreciation            3,000

Record the purchase of assets with cash                                cr. Plant Asset             3,600

                                                                                                cr. Gain on sale               400

(3) dr. Depreciation Expense 2,400                           Record sale of Plant Asset for Cash

            cr. Accum. Depreciation        2,400

Record depreciation expense

Use these journal entries to post to the T accounts, Plant Assets and Accumulated Depreciation.

			Traditional account approach
				Plant Assets				A/Dep
				110,000					52,000
				115,400					51,400

What is beginning Net Plant Assets? (Plant Assets minus Accumulated Depreciation)

What is ending Net Plant Assets? (Plant Assets minus Accumulated Depreciation)

Calculate the Net Book Value of the Plant Assets sold by using the journal entry to record the gain or loss on the sale. JE (2) from above.

Credit to Plant Assets                                     _________________

subtract Debit to Accum. Depreciation          _________________

NBV of Plant Assets Sold                              _________600_____

Now treat the 2 accounts PP&E and Accumulated Depreciation as if they were only 1 account called Net Plant Assets. Post the same journal entries to the single account. The beginning and ending balance of Net Plant Assets should agree to b) and c) from above. Note – The labels for each item are on the left but this DOES NOT mean the item will be on the left side (debit) of the T account.

			Simplified account approach
					Net Plant Assets
Beg Bal
Depreciation
NBV Sold
Equip. Purchased

Notice that “depreciation expense” and “gain/loss on sale of plant assets” are items that would be reported on the income statement, while the beginning and ending balances are reported on the balance sheet. The cash paid and received for activity to these accounts is reported on the Statement of Cash Flows. Include the appropriate amounts from the JOURNAL ENTRIES to complete the section of the Statement of Cash Flows below. Note – These are the amounts that debit or credit the CASH ACCOUNT!! (highlighted)

Investing activity:

            Cash paid for purchase of Plant Assets          ______________

            Cash received from sale of Plant Assets        ______________

   Net Cash used for Investing Activities                   $            __(8,000)

Answer 1

Plant Assets					Accumulated Depreciation
Beg. Bal.	110000	3600	(2)		(2)	3000	52000	Beg. Bal.
(1)	9000						2400	(3)
End. Bal.	115400						51400	End. Bal.

Beginning net plant assets = Plant assets - Accumulated depreciation = $110000 - $52000 = $58000

Ending net plant assets = Plant assets - Accumulated depreciation = $115400 - $51400 = $64000

Credit to Plant Assets	3600
Subtract Debit to Accum. Depreciation	3000
NBV of Plant Assets Sold	600

Net Plant Assets
Beg. Bal.	58000
Depreciation		2400
NBV Sold		600
Equip. Purchased	9000
End. Bal.	64000

Investing activity:
Cash paid for purchase of Plant Assets	-9000
Cash received from sale of Plant Assets	1000
Net Cash used for Investing Activities $	-8000