The plant asset and accumulated depreciation accounts of Pell Corporation had th
ID: 2463965 • Letter: T
Question
The plant asset and accumulated depreciation accounts of Pell Corporation had the following balances at December 31, 2015:
On January 2, 2016, 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.
On March 31, 2016, a machine purchased for $58,000 in 2012 was sold for $36,500. Depreciation recorded through the date of sale totaled $24,650.
On May 1, 2016, 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.
On November 1, 2016, 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 2017.
On December 31, 2016, Pell purchased a new automobile for $15,250 cash and trade-in of an old automobile purchased for $18,000 in 2012. Depreciation on the old automobile recorded through December 31, 2016, totaled $13,500. The fair value of the old automobile was $3,750.
For each asset classification, prepare a schedule showing depreciation for the year ended December 31, 2016, using the following depreciation methods and useful lives:
Depreciation is computed to the nearest month and no residual values are used. (Do not round intermediate calculations.)
The plant asset and accumulated depreciation accounts of Pell Corporation had the following balances at December 31, 2015:
Explanation / Answer
Prepare a schedule showing depreciation for the year ended December 31, 2016:
Machinery and equipment
Date
Details
Value
Assets
(put to use in months)
Calculation
Depreciation
amount
(straight line for 10 years)
2-Jan
Machinery and equipment
$ 260,000
Freight
$ 5,500
Installation
$ 27,000
Total cost of mach9nery
$ 292,500
12
$292,500/10
$ 29,250
31-Mar
Depreciation recorded
$ 24,650
3
($24,650*3months)/51 months
$ 1,450
1-Jan
Machinery and equipment
$ 1,158,000
12
1158000/10
$ 115,800
$ 146,500
Land improvements
Date
Details
Value
Assets
(put to use in months)
Calculation
Depreciation
amount
(straight line for 10 years)
1-Jan
Land improvements
$ 180,000
12
180000/10
$ 18,000
$ 18,000
Building
Date
Details
Value
Assets
(put to use in months)
Calculation
Depreciation
amount
(straight line for 10 years)
1-Jan
Begging
$ 1,500,000
12
1500000/20
$ 75,000
1-Nov
Building
$ 403,000
2
(403000/10)/12*2
$ 6,717
$ 81,717
Automobiles
Date
Details
Value
Assets
(put to use in months)
Calculation
Depreciation
amount
(straight line for 10 years)
1-Jan
Beginning balance
$ 150,000
12
150000*.25
$ 38,000
$ 38,000
Machinery and equipment
Date
Details
Value
Assets
(put to use in months)
Calculation
Depreciation
amount
(straight line for 10 years)
2-Jan
Machinery and equipment
$ 260,000
Freight
$ 5,500
Installation
$ 27,000
Total cost of mach9nery
$ 292,500
12
$292,500/10
$ 29,250
31-Mar
Depreciation recorded
$ 24,650
3
($24,650*3months)/51 months
$ 1,450
1-Jan
Machinery and equipment
$ 1,158,000
12
1158000/10
$ 115,800
$ 146,500
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