At December 31, 2017, Cord Company\'s plant asset and accumulated depreciation a
ID: 2594097 • 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 32,000 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 $246,000 and $574,000, respectively.
On March 25, 2018, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $234,000. 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 $332,000. Additional costs of $11,000 for delivery and $57,000 for installation were incurred.
On August 30, 2018, Cord purchased a new automobile for $13,200.
On September 30, 2018, a truck with a cost of $24,700 and a book value of $10,400 on date of sale was sold for $12,200. Depreciation for the nine months ended September 30, 2018, was $2,340.
On December 20, 2018, a machine with a cost of $20,500 and a book value of $3,150 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 $ 182,000 $ — Buildings 1,850,000 335,900 Machinery and equipment 1,475,000 324,500 Automobiles and trucks 179,000 107,325 Leasehold improvements 230,000 115,000 Land improvements — —
Explanation / Answer
Solution:(1):
Plant facility acquired from king Corp on 1/6/18 allocation to land and building.
Fair value= 32000*60 = $1,920,000
Allocation in proportion to appraisal value at date of exchange:-
Therefore, value of land = 1920000*30% = $576,000
Value of Building = 1920000*70% = $1,344,000
Machinery and equipment purchased on 7/1/18:
Cord Company
Analysis of changes in plant Assets
For the year ended December 31,2018
Solution:(2):
Cord Company
Depreciation and Amortization Expense
For the year ended December 31,2018
Book value(1/1/18)
(1,850,000-335,900)
Total Depreciation and Amortization Expense for 2018 = 14,625+171,486+167,500+21,341+23,000
= $397,952
Particulars Amount($) % of total Land 246,000 30 Building 574,000 70 Total 820,000 100Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.