At December 31, 2017, Cord Company\'s plant asset and accumulated depreciation a

Question

At December 31, 2017, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows: Category Plant Asset Accumulated Depreciation and Amortization Land $ 173,000 $ — Buildings 1,400,000 326,900 Machinery and equipment 1,025,000 315,500 Automobiles and trucks 170,000 98,325 Leasehold improvements 212,000 106,000 Land improvements — — Depreciation methods and useful lives: Buildings—150% declining balance; 25 years. Machinery and equipment—Straight line; 10 years. Automobiles and trucks—150% declining balance; 5 years, all acquired after 2014. Leasehold improvements—Straight line. Land improvements—Straight line. Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2018 and other information: On January 6, 2018, a plant facility consisting of land and building was acquired from King Corp. in exchange for 23,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $50 a share. Current assessed values of land and building for property tax purposes are $182,500 and $547,500, respectively. On March 25, 2018, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $180,000. These expenditures had an estimated useful life of 12 years. The leasehold improvements were completed on December 31, 2014, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2020, was renewable for an additional four-year term. On April 30, 2018, Cord exercised the renewal option. On July 1, 2018, machinery and equipment were purchased at a total invoice cost of $323,000. Additional costs of $10,000 for delivery and $48,000 for installation were incurred. On August 30, 2018, Cord purchased a new automobile for $12,300. On September 30, 2018, a truck with a cost of $23,800 and a book value of $8,800 on date of sale was sold for $11,300. Depreciation for the nine months ended September 30, 2018, was $1,980. On December 20, 2018, a machine with a cost of $16,000 and a book value of $2,925 at date of disposition was scrapped without cash recovery. Required: 1. Prepare a schedule analyzing the changes in each of the plant asset accounts during 2018. Do not analyze changes in accumulated depreciation and amortization. 2. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2018.

Explanation / Answer

Working Notes a Expenses to be allocated to Land and Building from plant facility from King Corp. Value of the shares issued in shares ie 23000*$50 per share $1,150,000 Therefore the allocation have to be done on the basis of proportion to the appraisal values on the exchange date. Assets Amount % of total Land $182,500 25 ($182500/$730000) Building $547,500 75 ($547500/$730000) Total $730,000 Value of Land Acquired from King Corp Total Value on acquistion $1,150,000 Land (25% *$1150000) $287,500 Building (75% * $1150000) $862,500 b Cost of Machinery and Equipment Acquired $323,000 Add Delivery Charges $10,000 Add Installation Charges $48,000 Total Cost of the Machinery Acquired $381,000 c Calculation of Depreciation on Land Improvements Cost of Land Improvement as on 3/25/2018 $180,000 Estimated Life 12 yrs Method of Depreciation Str Line Method Depreciation charges /yr $180000/12 $15,000 Depreciation on land Improvement during the year 2018 ie 1/4/2018 to 12/31/2018 ($15000*9/12) $11,250 d Calculation of Depreciation on Machinery Cost of Machinery as on 12/31/2017 $1,025,000 Cost of Machinery acquired $381,000 Estimated Useful Life 10 yrs Depreciation Method Str Line Method Depreciation on Old Machinery ($1025000/10) $102,500 New Machinery Purchased as on 7/1/2018 (381000/10 *6/12) $19,050 Total Depreciation on Machinery $121,550 e Depreciation on Automobile and Trucks Cost of Automobile and Trucks as on 12/31/2017 $170,000 Less Accumulated Depreciation on Automobile and Trucks $98,325 B.V of Automobile and Truck as on 12/31/2017 $71,675 Less B.V of Truck Sold as on 9/30/2018($8800+$1980) $10,780 Net BV of Automobile and Truck s.t to depreciation $60,895 Autobobile aquired on 8/30/2018 $12,300 Estimated Life 5 Yrs Depreciation Method 150% of Declining Method Old Automobile and Truck ($60895 *150%)/5 $18,268 New Truck from sept to dec 2018 ie for 4 months ($12300*150%)/5*4/12 $1,230 Depreciation on the truck which was sold $1,980 Total Depreciation on Automobile and Trucks $21,478 f Cost of Leasehold improvement as on 12/31/2017 $212,000 Less Accumulated Depreciation as on 12/31/2017 $106,000 BV as on 12/31/2017 $106,000 Amortization of lease for the period is 1/1/2018 to 12/31/2022 5 yrs Amortization for lease hold improvements($106000/5) $21,200 g Calculation of Depreciation on Building Cost of Builing as on 12/31/2017 $1,400,000 Accumulated Depreciation $326,900 BV of Machinery $1,073,100 Add Buiding Acquired $862,500 Net BV $1,935,600 Life 25 Yrs Depreciation Method 150% of DecliningMethod Depreciation($1935600*150%)/25 $116,136 Requirement 1 CORD COMPANY Analysis of changes in Plant Assets for the yr ended 31st December 2018 Balance as on 12/31/2017 Balance as on 12/31/2018 Land as per WN $173,000 $173,000 Increase in Land $287,500 $287,500 Land Improvements $180,000 $180,000 Building as per WN $1,400,000 $1,400,000 Increase in Building $862,500 $862,500 Machinery and Equipment as per WN $10,250,000 $10,250,000 New Machinery Acquired $381,000 $381,000 Sold of Machinery $16,000 ($16,000) Automobile and Truck $170,000 $170,000 New Automobile Aquired $12,300 $12,300 Sale of Truck $23,800 ($23,800) Lease Hold Improvements $212,000 $212,000 Total $12,205,000 $1,723,300 $39,800 $13,888,500 Requirement 2 CORD COMPANY Depreciation and Amortization Expense for the yr ended 31st Dec 2018 Land Improvement as per WN $11,250 Buidind as per WN $116,136 Machinery and Equipment as per WN $121,550 Automobile and Truck as per WN $21,478 LeaseHold Improvements as per WN $21,200 Total Amortization for 2018 $291,614

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