At December 31, 2015, Cord Company\'s plant asset and accumulated depreciation a
ID: 2476715 • Letter: A
Question
At December 31, 2015, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows:
Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2016 and other information:
On January 6, 2016, a plant facility consisting of land and building was acquired from King Corp. in exchange for 27,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $40 a share. Current assessed values of land and building for property tax purposes are $154,000 and $616,000, respectively.
On March 25, 2016, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $204,000. These expenditures had an estimated useful life of 12 years.
The leasehold improvements were completed on December 31, 2012, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2018, was renewable for an additional four-year term. On April 29, 2016, Cord exercised the renewal option.
On July 1, 2016, machinery and equipment were purchased at a total invoice cost of $327,000. Additional costs of $12,000 for delivery and $52,000 for installation were incurred.
On September 30, 2016, a truck with a cost of $24,200 and a book value of $9,400 on date of sale was sold for $11,700. Depreciation for the nine months ended September 30, 2016, was $2,115.
On December 20, 2016, a machine with a cost of $18,000 and a book value of $3,025 at date of disposition was scrapped without cash recovery.
Prepare a schedule analyzing the changes in each of the plant asset accounts during 2016. 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, 2016. (Do not round intermediate calculations.)
At December 31, 2015, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows:
Explanation / Answer
1) ANALYSIS OF CHANGES IN PLANT ASSETS FOR THE YEAR ENDED DECEMBER 31,2016 Balance on Balance on Category 12.31.2015 Increase Decrease 12.31.2016 Land 177,000 154,000 0 331000 Buildings 1,600,000 616,000 2216000 Machinery & Equipment 1,225,000 327,000 12,500 1539500 Automobiles & trucks 174,000 11,700 24,200 161500 Lease hold improvements 220,000 220000 Land improvements 0 154,000 154000 WORKINGS Calculation of value of land and buildings by exchange of shares Fair value of shares = 27000*40= 1080000 Allocation to Land and Buildings in the ratio of 198:462, being their fair values Land 154/616 0.25 Building 0.75 2) DEPRECIATION AND AMORTIZATION EXPENSE FOR THE YEAR ENDED 12.31.216 Land Improvements: Yearly Depreciation = 204,000 @ 8 1/3 % (100/12) 45334 Proportionate amortisation for the year for 9 months 60445 Buildings: Carrying amount on 12.31.2015(1600000-330900) 1E+06 Purchased on 1.6.2016 616000 Total amount subject to depreciation 2E+06 Rate with 150% declining balance 25 years = (100/25*1.5) =6% Depreciation for the year 84126 Machinery and Equipment Depreciation on opening balance = 675000*.10 67500 Depreciation on acquisition during the year =368000 at 10% 18400 for 6 months Total for the year 85900 Automobiles and Trucks Opening carrying amount =163000-91325 71675 Less: carrying amount on truck sold =7400+1665 9065 80740 Depreciation @ 30% 24222 Automobile purchased on 30th august 2016 for 11600 Depreciation on the above for 4 months @ 30% 1160 Depreciation for automobile 25382 Lease hold improvements Carrying amount Opening 99000 Balance years upto 12.31.2022 - 7 years = 1/7th Amortisation = 1/7th 14143
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