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 $ 385,000 $ 0 Land improvements 190,500 52,000 Building 1,570,000 385,000 Machinery and equipment 1,228,000 440,000 Automobiles 157,000 115,500 Transactions during 2016 were as follows: a. On January 2, 2016, machinery and equipment were purchased at a total invoice cost of $295,000, which included a $6,200 charge for freight. Installation costs of $34,000 were incurred. b. On March 31, 2016, a machine purchased for $65,000 in 2012 was sold for $40,000. Depreciation recorded through the date of sale totaled $27,625. c. On May 1, 2016, expenditures of $57,000 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 $45 per share. Pell paid legal fees and title insurance totaling $26,500. Shortly after acquisition, the building was razed at a cost of $42,000 in anticipation of new building construction in 2017. e. On December 31, 2016, Pell purchased a new automobile for $17,000 cash and trade-in of an old automobile purchased for $21,500 in 2012. Depreciation on the old automobile recorded through December 31, 2016, totaled $16,125. The fair value of the old automobile was $4,100. 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.)

PELL CORPORATION

Depreciation Expense

For the Year Ended December 31, 2016

Land Improvements

Building Machinery and equipment

Automobiles

Total depreciation expense for 2016 0

Explanation / Answer

PELL CORPORATION
Depreciation For the Year Ended December 31, 2015
Land improvements:
Cost $ 190,500
Straight-line rate (1 ÷ 15 years) × 6 2/3% = $ 12,700

Building:
Book value 12/31/15 ($1,570,000 – 385,000) $1,185,000
150% declining balance rate:
(1 ÷ 20 years = 5% x 1.5) x 7.5% = $ 88,875

Machinery and Equipment:
Balance, 12/31/15 $1,228,000
Deduct machine sold (65,000) $1,163,000
Straight-line rate (1 ÷ 10 years) x 10% = 116,300

Purchased 1/2/16 295,000
Depreciation x 10% = 29,500

Machine sold 3/31/16 65,000
Depreciation for three months x 2.5% = 1,625
Total depreciation on machinery and equipment $147,425
Automobiles:
Book value on 12/31/15 ($157,000 – 115,500) $41,500
150% declining balance rate:
(1 ÷ 3 years = 33.333% x 1.5) x 50% $ = 20,750
Total depreciation for 2015 $269,750

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