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, 2015: Plant Asset Accumulated Depreciation Land $ 380,000 $ 0 Land improvements 189,000 51,000 Building 1,560,000 380,000 Machinery and equipment 1,218,000 435,000 Automobiles 156,000 115,000 Transactions during 2016 were as follows: a. On January 2, 2016, machinery and equipment were purchased at a total invoice cost of $290,000, which included a $6,100 charge for freight. Installation costs of $33,000 were incurred. b. On March 31, 2016, a machine purchased for $64,000 in 2012 was sold for $39,500. Depreciation recorded through the date of sale totaled $27,200. c. On May 1, 2016, expenditures of $56,000 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, 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 $44 per share. Pell paid legal fees and title insurance totaling $26,000. Shortly after acquisition, the building was razed at a cost of $41,000 in anticipation of new building construction in 2017. e. On December 31, 2016, Pell purchased a new automobile for $16,750 cash and trade-in of an old automobile purchased for $21,000 in 2012. Depreciation on the old automobile recorded through December 31, 2016, totaled $15,750. The fair value of the old automobile was $4,050. Required: For each asset classification, prepare a schedule showing depreciation for the year ended December 31, 2016, using the following depreciation methods and useful lives: Land improvements—Straight line; 15 years. Building—150% declining balance; 20 years. Machinery and equipment—Straight line; 10 years. Automobiles—150% declining balance; 3 years. Depreciation is computed to the nearest month and no residual values are used. (Do not round intermediate calculations.)

Explanation / Answer

The depreciation schedule is given below:

Pell Corporation Depreciation Schedule For the Year Ended December 31, 2016 Land Improvements: Cost [A] 189,000 Straight Line Rate (1/15) [B] 6.67% Depreciation on Land Improvements [A*B] $12,600 Building: Book Value as on 31/12/2015 (1,560,000 – 380,000) [C] 1,180,000 150% Declining Balance Rate (1/20*150%) [D] 7.50% Depreciation on Buildings [C*D] $88,500 Machinery and Equipment: Balance as on 31/12/2015 1,218,000 Less Cost of Machine Sold 64,000 Straight Line Rate (1/10) 10.00% Depreciation on Existing Machine [(1,218,000 – 64,000)*10%] 115,400 Cost of New Machine (290,000 + 33,000) 323,000 Straight Line Rate (1/10) 10.00% Depreciation on New Machine (323,000*10%) 32,300 Machine Sold on 31/03/2016 64,000 Depreciation on Machine Sold for 3 Months at 10% Rate (64,000*10%*3/12) 1,600 Total Depreciation on Machinery and Equipment (115,400 + 32,300 + 1,600) $149,300 Automobiles: Book Value as on 31/12/2015 (156,000 – 115,000) [E] 41,000 150% Declining Balance Rate (1/3*150%) [F] 50.00% Depreciation on Automobiles (E*F) $20,500

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