At December 31, 2017, Cord Company\'s plant asset and accumulated depreciation a
ID: 2526975 • Letter: A
Question
At December 31, 2017, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows: Category Land Buildings Machinery and equipment Automobiles and trucks Leasehold improvements Land improvements Plant Asset $ 172,000 1,350,000 975,000 169,000 210,000 Accumulated Depreciation and Amortization $ - 325,900 314,500 97,325 105,000 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: a. On January 6, 2018, a plant facility consisting of land and building was acquired from King Corp. in exchange for 22,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $60 a share. Current assessed values of land and building for property tax purposes are $216,000 and $504,000, respectively. b. On March 25, 2018, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $174,000. These expenditures had an estimated useful life of 12 years. c. 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. d. On July 1, 2018, machinery and equipment were purchased at a total invoice cost of $322,000. Additional costs of $11,000 for delivery and $47,000 for installation were incurred. e. On August 30, 2018, Cord purchased a new automobile for $12,200. f. On September 30, 2018, a truck with a cost of $23,700 and a book value of $8,600 on date of sale was sold for $11,200. Depreciation for the nine months ended September 30, 2018, was $1,935. g. On December 20, 2018, a machine with a cost of $15,500 and a book value of $2,900 at date of disposition was scrapped without cash recovery.Explanation / Answer
Solution:-
Part:-1
Cord Company
Analysis of changes in Plant Assets
For the Year Ending December 31, 2018
Amount in $
Balances
Balance
12/31/0217
Increase
Decrease
12/31/0218
Land
$ 172,000.00
$ 396,000.00
$ -
$ 568,000.00
Land Improvements
$ -
$ 174,000.00
$ -
$ 174,000.00
Buildings
$ 1,350,000.00
$ 924,000.00
$ -
$ 2,274,000.00
Machinery & Equipments
$ 975,000.00
$ 380,000.00
$ 15,500.00
$ 1,339,500.00
Automobiles & Trucks
$ 169,000.00
$ 11,200.00
$ 23,700.00
$ 156,500.00
Leasehold Improvements
$ 210,000.00
$ -
$ -
$ 210,000.00
Total
$ 2,876,000.00
$ 1,885,200.00
$ 39,200.00
$ 4,722,000.00
Note:-
1. Cost of Delivery $11000 and cost of installation $47000 will be included in cost of machinery and equipments
2. There will be no addition to leasehold improvements as there is no asset acquired at present. It is only an agreement to acquire the same.
Part:-2
Cord Company
Depriciation and Amortisation Expenses
For the Year Ending December 31, 2018
Particulars
Depriciation
Land Improvements
11163.00
Buildings
116127.00
Machinery & Equipments
84916.00
Automobiles & Trucks
22580.00
Leasehold Improvements
26250.00
Total Depriciation and amortisation Expenses for the Year 2018
261036
Calculation of Depriciation:-
1. Land Improvements
From Date
To Date
Days
Amount
Working
Depriciation
On Addition During the Year
3/25/2018
12/31/2018
282
174000.00
=(174000/12)*281/365
11163.00
2. Building
From Date
To Date
Days
Amount
Working
Depriciation
On Opening Balance
1/1/2018
12/31/2018
365
1024100.00
=(1024100*6)/100
61446.00
On Addition During the Year
1/6/2018
12/31/2018
360
924000.00
=[{(924000*6)/100}*360/365]
54681.00
Total
116127.00
3. Machinery & Equipments
From Date
To Date
Days
Amount
Working
Depriciation
On Opening Balance
1/1/2018
12/31/2018
365
=(975000-314500-2900)=657600
=657600/10
65760.00
On Addition During the Year
7/1/2018
12/31/2018
184
380000.00
=(380000/10)*184/365
19156.00
Total
84916.00
4. Automobiles & Trucks
From Date
To Date
Days
Amount
Working
Depriciation
On Opening Balance Other than Sold Items
1/1/2018
12/31/2018
365
=(169000-97325-8600+1935)=65010
=65010*30/100
19503.00
On Sale During the Year (Given in Question
1935.00
On Addition During the Year
8/30/2018
12/31/2018
124
11200.00
=(11200*30/100)*124/365
1142.00
Total
22580.00
5. Leasehold Improvement
From Date
To Date
Days
Amount
Working
Depriciation
On Opening Balance
1/1/2018
12/31/2018
365
210000.00
=210000/8
26250.00
Total
26250.00
Calculation of Rate of Depriciation :-
for Building
Formula:-
= (1/Life)*Percentage of Dep.
=(1/25)*150%
=0.06 or 6%
for Automobiles & Trucks
Formula:-
= (1/Life)*Percentage of Dep.
=(1/5)*150%
=0.03or30%
Solution:-
Part:-1
Cord Company
Analysis of changes in Plant Assets
For the Year Ending December 31, 2018
Amount in $
Balances
Balance
12/31/0217
Increase
Decrease
12/31/0218
Land
$ 172,000.00
$ 396,000.00
$ -
$ 568,000.00
Land Improvements
$ -
$ 174,000.00
$ -
$ 174,000.00
Buildings
$ 1,350,000.00
$ 924,000.00
$ -
$ 2,274,000.00
Machinery & Equipments
$ 975,000.00
$ 380,000.00
$ 15,500.00
$ 1,339,500.00
Automobiles & Trucks
$ 169,000.00
$ 11,200.00
$ 23,700.00
$ 156,500.00
Leasehold Improvements
$ 210,000.00
$ -
$ -
$ 210,000.00
Total
$ 2,876,000.00
$ 1,885,200.00
$ 39,200.00
$ 4,722,000.00
Note:-
1. Cost of Delivery $11000 and cost of installation $47000 will be included in cost of machinery and equipments
2. There will be no addition to leasehold improvements as there is no asset acquired at present. It is only an agreement to acquire the same.
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