Assume that Inter Provincial Transport Ltd s balance sheet

includes the following #6671

Assume that Inter Provincial Transport Ltd s balance sheet includes the following

Assume that Inter-Provincial Transport Ltd.'s balance sheet includes the following assets under
Property, Plant, and Equipment: Land, Buildings, and Motor-Carrier Equipment. Inter-Provincial
has a separate accumulated depreciation account for each of these assets except land. Further,
assume that Inter-Provincial completed the following transactions:

2017

Jan. 2 Sold motor-carrier equipment with accumulated depreciation of $67,000 (cost of

$130,000) for $70,000 cash. Purchased similar new equipment with a cash price of

$176,000.

July 3 Sold a building that had cost $650,000 and had accumulated depreciation of

$145,000 through December 31 of the preceding year. Depreciation is computed on a straight-

line basis. The building had a 40-year useful life and a residual value of $250,000. Inter-
Provincial received $100,000 cash and a $400,000 note receivable.

Oct. 29 Purchased land and a building for a single price of $420,000. An independent appraisal
valued the land at $150,000 and the building at $300,000.

Dec. 31 Recorded depreciation as follows:

New motor-carrier equipment has an expected useful life of six years and an estimated residual
value of 5% of cost. Depreciation is computed on the double diminishing- balance method.

Depreciation on buildings is computed by the straight-line method. The new building carries a
40-year useful life and a residual value equal to 10% of its cost.

Requirement

1. Record the transactions in Inter-Provincial Transport Ltd.'s journal.

2. How does management choose which depreciation method to use?

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 Assume that Inter Provincial Transport Ltd s balance sheet includes the following

ANSWER
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