Question

Chapter 11, #4

Depreciation methods and useful lives:
Buildings—150% declining balance; 25 years.
Equipment—Straight line; 10 years.
Automobiles and trucks—200% declining balance; 5 years, all acquired after 2017.
Leasehold improvements—Straight line.
Land improvements—Straight line.

Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2021 and other information:

1. On January 6, 2021, a plant facility consisting of land and building was acquired from King Corp. in exchange for 19,000 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 $207,000 and $483,000, respectively.
2. On March 25, 2021, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $156,000. These expenditures had an estimated useful life of 12 years.
3. The leasehold improvements were completed on December 31, 2017, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2023, was renewable for an additional four-year term. On April 30, 2021, Cord exercised the renewal option.
4. On July 1, 2021, equipment was purchased at a total invoice cost of $319,000. Additional costs of $11,000 for delivery and $44,000 for installation were incurred.
5. On September 30, 2021, Cord purchased a new automobile for $11,900.
6. On September 30, 2021, a truck with a cost of $23,400 and a book value of $8,000 on date of sale was sold for $10,900. Depreciation for the nine months ended September 30, 2021, was $1,800.
7. On December 20, 2021, equipment with a cost of $14,000 and a book value of $2,825 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 2021. Do not analyze changes in accumulated depreciation and amortization.

	CORD COMPANY Analysis of Changes in Plant Assets For the Year Ending December 31, 2021 Balance Balance 12/31/2020 Increase Decrease 12/31/2021 Land $169,000 Land improvements 0 Buildings 1,200,000 Equipment 825,000 Automobiles and trucks 166,000 Leasehold improvements 204,000 $2,564,000 $0 $0 $0

2. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2021. (Do not round intermediate calculations. Round your final answers to nearest whole dollar.)

	CORD COMPANY Depreciation and Amortization Expense For the Year Ending December 31, 2021 Land Improvements    Buildings Equipment Automobiles and trucks Leasehold improvements Total depreciation and amortization expense for 2021 $0

Answer 1

CORD COMPANY
Analysis of Changes in Plant Assets
For the Year Ending December 31, 2021
	Balance			Balance
	12/31/20	Increase	Decrease	12/31/21
Land	$               169,000	$               342,000		$ 511,000
Land improvements	$                           -	$               156,000		$ 156,000
Buildings	$           1,200,000	$               798,000		$ 1,998,000
Machinery and equipment	$               825,000	$               374,000	$ 14,000	$           1,185,000
Automobiles and trucks	$               166,000	$                 11,900	$ 23,400	$               154,500
Leasehold improvements	$               204,000			$ 204,000
	$ 2,564,000	$           1,681,900	$          37,400	$           4,208,500

CORD COMPANY
Depreciation and Amortization Expense
For the Year Ending December 31, 2021
Land Improvements	9,750
Buildings	100,506
Machinery and equipment	101,200
Automobiles and trucks	28,137
Leasehold improvements	20,400
Total depreciation and amortization expense for 2021	259,993

WORKING NOTES
Explanation
	Amount
Land	207000	30%	1140000	342000
Building	483000	70%	1140000	798000
	690000			1140000
Machinery
Invoice cost	319,000
Delivery cost	11,000
Installation cost	44,000
Total acquisition cost	374,000
CORD COMPANY
Depreciation and Amortization Expense
For the Year Ended December 31, 2018
Land Improvements:
Cost	156,000
Straight-line rate (1 ÷ 12 years)	8.33%
Annual depreciation	13,000
Depreciation on land improvements for 2018:	× 3/4	9,750
(3/25 to 12/31/2018)
Buildings:
Book value, 1/1/2018	877,100
Building acquired 1/6/2018	798,000
Total amount subject to depreciation	1,675,100
150% declining balance rate:	6.00%	100,506
(1 ÷ 25 years = 4% × 1.5)
Machinery and equipment:
Balance, 1/1/2018	825,000
Straight-line rate (1 ÷ 10 years)	10	82,500
Purchased on 7/1/2018	374,000
Depreciation for one-half year	10*6/12	18,700
Depreciation on machinery and equipment for 2018		101,200
Automobiles and trucks:
Book value, 1/1/2018	71,675
Deduct 1/1/2018 book value of truck sold	9800
on 9/30
Amount subject to depreciation	61,875
200% declining balance rate:	40%	24,750
(1 ÷ 5 years = 20% × 2)
Automobile purchased 8/30/2018	11,900
Depreciation for 2018 (40% × 4/12)	13%	1,587
Truck sold on 9/30/2018 – depreciation (given)		1,800
Depreciation on automobiles and trucks		28,137
Leasehold improvements:
Book value, 1/1/2018	102,000
Amortization period (1/1/2018 to 12/31/2022)	5
Amortization of leasehold improvements for 2018		20,400
Total depreciation and amortization expense for 2018		259,993