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 $ 173,000 $ — Buildings 1,400,000 326,900 Machinery and equipment 1,025,000 315,500 Automobiles and trucks 170,000 98,325 Leasehold improvements 212,000 106,000 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 23,000 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 $182,500 and $547,500, respectively. On March 25, 2018, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $180,000. 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 $323,000. Additional costs of $10,000 for delivery and $48,000 for installation were incurred. On August 30, 2018, Cord purchased a new automobile for $12,300. On September 30, 2018, a truck with a cost of $23,800 and a book value of $8,800 on date of sale was sold for $11,300. Depreciation for the nine months ended September 30, 2018, was $1,980. On December 20, 2018, a machine with a cost of $16,000 and a book value of $2,925 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

	Working Notes
a	Expenses to be allocated to Land and Building from plant facility from King Corp.
	Value of the shares issued in shares ie 23000*$50 per share							$1,150,000
	Therefore the allocation have to be done on the basis of
	proportion to the appraisal values on the exchange date.
	Assets				Amount	% of total
	Land				$182,500	25	($182500/$730000)
	Building				$547,500	75	($547500/$730000)
	Total				$730,000
	Value of Land Acquired from King Corp
	Total Value on acquistion				$1,150,000
	Land (25% *$1150000)				$287,500
	Building (75% * $1150000)				$862,500
b	Cost of Machinery and Equipment Acquired					$323,000
	Add Delivery Charges					$10,000
	Add Installation Charges					$48,000
	Total Cost of the Machinery Acquired					$381,000
c	Calculation of Depreciation on Land Improvements
	Cost of Land Improvement as on 3/25/2018					$180,000
	Estimated Life					12 yrs
	Method of Depreciation					Str Line Method
	Depreciation charges /yr			$180000/12		$15,000
	Depreciation on land Improvement during the
	year 2018 ie 1/4/2018 to 12/31/2018 ($15000*9/12)					$11,250
d	Calculation of Depreciation on Machinery
	Cost of Machinery as on 12/31/2017					$1,025,000
	Cost of Machinery acquired					$381,000
	Estimated Useful Life					10 yrs
	Depreciation Method					Str Line Method
	Depreciation on Old Machinery ($1025000/10)						$102,500
	New Machinery Purchased as on 7/1/2018 (381000/10 *6/12)						$19,050
	Total Depreciation on Machinery						$121,550
e	Depreciation on Automobile and Trucks
	Cost of Automobile and Trucks as on 12/31/2017						$170,000
	Less Accumulated Depreciation on Automobile and Trucks						$98,325
	B.V of Automobile and Truck as on 12/31/2017						$71,675
	Less B.V of Truck Sold as on 9/30/2018($8800+$1980)						$10,780
	Net BV of Automobile and Truck s.t to depreciation						$60,895
	Autobobile aquired on 8/30/2018						$12,300
	Estimated Life						5 Yrs
	Depreciation Method						150% of Declining Method
	Old Automobile and Truck ($60895 *150%)/5						$18,268
	New Truck from sept to dec 2018 ie for 4 months ($12300*150%)/5*4/12						$1,230
	Depreciation on the truck which was sold						$1,980
	Total Depreciation on Automobile and Trucks						$21,478
f	Cost of Leasehold improvement as on 12/31/2017						$212,000
	Less Accumulated Depreciation as on 12/31/2017						$106,000
	BV as on 12/31/2017						$106,000
	Amortization of lease for the period is 1/1/2018 to 12/31/2022						5 yrs
	Amortization for lease hold improvements($106000/5)						$21,200
g	Calculation of Depreciation on Building
	Cost of Builing as on 12/31/2017						$1,400,000
	Accumulated Depreciation						$326,900
	BV of Machinery						$1,073,100
	Add Buiding Acquired						$862,500
	Net BV						$1,935,600
	Life						25 Yrs
	Depreciation Method 150% of DecliningMethod
	Depreciation($1935600*150%)/25						$116,136
	Requirement 1
					CORD COMPANY
					Analysis of changes in Plant Assets
					for the yr ended 31st December 2018
				Balance as on 12/31/2017				Balance as on 12/31/2018
	Land as per WN			$173,000				$173,000
	Increase in Land				$287,500			$287,500
	Land Improvements				$180,000			$180,000
	Building as per WN			$1,400,000				$1,400,000
	Increase in Building				$862,500			$862,500
	Machinery and Equipment as per WN			$10,250,000				$10,250,000
	New Machinery Acquired				$381,000			$381,000
	Sold of Machinery					$16,000		($16,000)
	Automobile and Truck			$170,000				$170,000
	New Automobile Aquired				$12,300			$12,300
	Sale of Truck					$23,800		($23,800)
	Lease Hold Improvements			$212,000				$212,000
	Total			$12,205,000	$1,723,300	$39,800		$13,888,500
	Requirement 2
				CORD COMPANY
				Depreciation and Amortization Expense
				for the yr ended 31st Dec 2018
	Land Improvement as per WN					$11,250
	Buidind as per WN					$116,136
	Machinery and Equipment as per WN					$121,550
	Automobile and Truck as per WN					$21,478
	LeaseHold Improvements as per WN					$21,200
	Total Amortization for 2018					$291,614