Question

At December 31, 2017, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows:

Category	Plant Asset				Accumulated Depreciation and 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		—				—

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 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.

b.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.

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 $334,000. Additional costs of $10,000 for delivery and $59,000 for installation were incurred.

e.On August 30, 2018, Cord purchased a new automobile for $13,400.

f.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.

g.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

Answer 1

Solution
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
Total	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		03-Apr		$       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