At December 31, 2017, Cord Company\'s plant asset and accumulated depreciation a
ID: 2543096 • 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 34,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $50 a share. Current assessed values of land and building for property tax purposes are $210,000 and $630,000, respectively.
On March 25, 2018, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $246,000. 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 $334,000. Additional costs of $10,000 for delivery and $59,000 for installation were incurred.
On August 30, 2018, Cord purchased a new automobile for $13,400.
On September 30, 2018, a truck with a cost of $24,900 and a book value of $10,800 on date of sale was sold for $12,400. Depreciation for the nine months ended September 30, 2018, was $2,430.
On December 20, 2018, a machine with a cost of $21,500 and a book value of $3,200 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
Prepare a schedule analyzing the changes in each of the plant asset accounts during 2018. Do not analyze changes in accumulated depreciation and amortization.
For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2018. (Do not round intermediate calculations. Round your final answers to nearest whole dollar.)
Category Plant Asset Accumulated Depreciationand Amortization Land $ 184,000 $ — Buildings 1,950,000 337,900 Machinery and equipment 1,575,000 326,500 Automobiles and trucks 181,000 109,325 Leasehold improvements 234,000 117,000 Land improvements — —
Explanation / Answer
Cord Company Analysis of Change in plant Assets For the year ending, December 31, 2018 Balance Balance 12/31/17 Increase Decrease 12/31/18 Land (Working note 1) $ 1,84,000 $ 4,25,000 $ - $ 6,09,000 Land Improvements $ - $ 2,46,000 $ - $ 2,46,000 Buildings (Working note 1) $ 19,50,000 $ 12,75,000 $ - $ 32,25,000 Machinery and Equipment (Working note 2) $ 15,75,000 $ 4,03,000 $ 21,500 $ 19,56,500 Automobiles and Truck $ 1,81,000 $ 13,400 $ 24,900 $ 1,69,500 Leasehold improvements $ 2,34,000 $ - $ - $ 2,34,000 $ 41,24,000 $ 23,62,400 $ 46,400 $ 64,40,000 Working notes 1. Plant facility acquired from King on Jan 06, 2018 Fair value 34,000 shares of cord common stock at $ 50 market price $ 17,00,000 Allocation in propotion to appraised values at the exchange date Amount % to total Land 210000 25 Building 630000 75 840000 100 Land ( $ 1,700,000 X 25 % ) $ 4,25,000 Building ( $ 1,700,000 X 75 % ) $ 12,75,000 2. Machinery and Equipment purchased on Jul 01, 2018 Invoice cost $ 3,34,000 Delivery Cost $ 10,000 Installation Cost $ 59,000 Total Acquisition Cost $ 4,03,000 Cord Company Depreciation and Amortisation Expense For the year ending, December 31, 2018 Land Improvements Cost $ 2,46,000 Multiply by Straight line rate ( 100 % / 12) 8.33% Annual Depreciation Expense $ 20,500 Depreciation for March 25, 2018 to Dec 31, 2018 3/4 $ 15,375 Buildings Carrying amount Jan 01, 2018 ( $ 1,950,000 - $337,900 ) $ 19,12,100 Building acquired on Jan 06, 2018 $ 12,75,000 Total $ 31,87,100 150 % Declining Balance rate ( 100 % / 25 ) X 1.5 6% $ 1,91,226 Machinery and Equipment Balance Jan 01, 2018 $ 15,75,000 Straight line rate (100 % / 10) 10% $ 1,57,500 Purchased Jul 01, 2018 $ 4,03,000 Depreciation for 2018 ( 10 % X 6/12) 5% $ 20,150 Total Depreciation $ 1,77,650 Automobiles and Truck Carrying amount Jan 01, 2018 ( $ 181,000 - $ 109,325 ) $ 71,675 Deduct Carrying amount on Truck sold on sep 30, 2018 ( $ 10,800 + $ 2,430 ) $ 13,230 $ 58,445 150 % Declining Balance rate ( 100 % / 5 ) X 1.5 30% $ 17,534 Automobiles Purchased on august 30, 2018 $ 13,400 Depreciation for 2018 ( 30 % X 4/12) 10% $ 1,340 Truck sold on Sep 30, 2018 ( Dep given) $ 2,430 Total Depreciation $ 21,304 Leasehold improvements Book Value on Jan 01, 2018 ($ 234,000 - $ 117,000) $ 1,17,000 Amortisation Period ( Jan 01, 2018 to Dec 31, 2022) 5 years Amortisation for leasehold period for 2018 $ 23,400 Total Depreciation and Amortisation Expense for December, 2018 $ 4,28,955
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