The plant asset and accumulated depreciation accounts of Pell Corporation had th

Question

The plant asset and accumulated depreciation accounts of Pell Corporation had the following balances at December 31, 2010

Land - Plant Asset 350000 - Accumulated depreciation $ ---
Land improvments - Plant Assets 180000 Accumulated depreciiation 45000
Building - Plant Assets 1500000 Accumulated Depreciation 350000
Machinery and equiptment - Plant Assets 1158000 -Accumulated Depreciation - 405000
Automobiles -Plant Assets 150000 - Accumulated depreciation -112000

Transactions during 2011 were as follows:




a.On January 2, 2011, machinery and equipment were purchased at a total invoice cost of $260,000, which included a $5,500 charge for freight. Installation costs of $27,000 were incurred.




b.On March 31, 2011, a machine purchased for $58,000 in 2007 was sold for $36,500. Depreciation recorded through the date of sale totaled $24,650.




c.On May 1, 2011, expenditures of $50,000 were made to repave parking lots at Pell's plant location. The work was necessitated by damage caused by severe winter weather.




d.On November 1, 2011, Pell acquired a tract of land with an existing building in exchange for 10,000 shares of Pell's common stock that had a market price of $38 per share. Pell paid legal fees and title insurance totaling $23,000. Shortly after acquisition, the building was razed at a cost of $35,000 in anticipation of new building construction in 2012.




e.On December 31, 2011, Pell purchased a new automobile for $15,250 cash and trade-in of an old automobile purchased for $18,000 in 2007. Depreciation on the old automobile recorded through December 31, 2011, totaled $13,500. The fair value of the old automobile was $3,750.



Required:
1) Prepare a schedule analyzing the changes in each of the plant assets during 2011, with detailed supporting computations.

2) Prepare a schedule showing the gain or loss from each asset disposal that would be recognized in Pell%u2019s income statement for the year ended December 31, 2011

Explanation / Answer

1,158,000 / 10 years = 115,800 (Previous yearly depreciation)

24,650 (depreciation to date from "B") / 51 months (4 years + 3 months in 2013) = 483 (rounded)

483 x 12 months = 5796

483 x 3 months = 1450

(260,000 + 27,000) /10 years = 28,700

115,800 Previous yearly depreciation
-5,796 Yearly depreciation from letter

%u201CB%u201D
110,004
+1,450 3 months worth of depreciation from letter %u201CB%u201D
111,454

+28,700 Yearly depreciation from new machinery from letter %u201CA%u201D

140,154 TOTAL DEPRECIATION FOR MACHINERY & EQUIPMENT FOR 2013

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