At December 31, 2017, Cord Company\'s plant asset and accumulated depreciation a
ID: 2528277 • Letter: A
Question
At December 31, 2017, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows:
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 29,000 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 $237,000 and $553,000, respectively.
On March 25, 2018, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $216,000. 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 $329,000. Additional costs of $11,000 for delivery and $54,000 for installation were incurred.
On August 30, 2018, Cord purchased a new automobile for $12,900.
On September 30, 2018, a truck with a cost of $24,400 and a book value of $9,800 on date of sale was sold for $11,900. Depreciation for the nine months ended September 30, 2018, was $2,205.
On December 20, 2018, a machine with a cost of $19,000 and a book value of $3,075 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.
and Amortization Land $ 179,000 $ — Buildings 1,700,000 332,900 Machinery and equipment 1,325,000 321,500 Automobiles and trucks 176,000 104,325 Leasehold improvements 224,000 112,000 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 29,000 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 $237,000 and $553,000, respectively.
On March 25, 2018, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $216,000. 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 $329,000. Additional costs of $11,000 for delivery and $54,000 for installation were incurred.
On August 30, 2018, Cord purchased a new automobile for $12,900.
On September 30, 2018, a truck with a cost of $24,400 and a book value of $9,800 on date of sale was sold for $11,900. Depreciation for the nine months ended September 30, 2018, was $2,205.
On December 20, 2018, a machine with a cost of $19,000 and a book value of $3,075 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
Answer 1. Beginning Balance Increase Decrease Ending Balance Land 179,000.00 522,000.00 701,000.00 Land Improvements - 216,000.00 216,000.00 Buildings 1,700,000.00 1,218,000.00 2,918,000.00 Machinery & Equipment 1,325,000.00 394,000.00 (19,000.00) 1,700,000.00 Auto & Truck 176,000.00 12,900.00 (24,400.00) 164,500.00 Leasehold Improvements 224,000.00 224,000.00 Total 3,604,000.00 2,362,900.00 (43,400.00) 5,923,500.00 Fair Value Weights Amount Land 237,000.00 30% 522,000.00 Buildings 553,000.00 70% 1,218,000.00 Total 790,000.00 1,740,000.00 Answer 2. Depreciation Expense Land Improvements - 12 Years Life - Straight Line = ($216,000 / 12 Years ) X 9/12 = $13,500 Buildings - 25 Years = 150% Declining Balance = 1/25 X 1.50 = 6% Outstanding Entire Year - (1,700,000 - $332,900) X 6% 82,026.00 Addition - $1,218,000 X 6% 73,080.00 Total 155,106.00 Machinery & Equipment - 10 Year - Straight Line O/s Entire year - ($1,325,000 - 19,000) / 10 Years 130,600.00 Addition - ($394,000 / 10 Years) X 6/12 19,700.00 Disposition - ($19,000 / 10 Years) X 12/12 1,900.00 Total 152,200.00 Auto & Trucks - 150% Declining Method O/s Entire Year - [($176,000 - $104,325) - 19,000 - (14,600 - 2,205)] = $65,070 X 30% 19,521.00 Additions - $12,900 X 30% X 4/12 1,290.00 Disposition 2,205.00 Total Depreciation 23,016.00 Leasehold Improvements - 5 Years per Item - straight Line Book Value - ($224,000 - $112,000) / 5 Years 22,400.00 Total Depreciation & Amortization Land Improvements 13,500.00 Buildings 155,106.00 Machinery & Equipment 152,200.00 Auto & Trucks 23,016.00 Leasehold Improvements 22,400.00 Total 366,222.00
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