In: Accounting
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:
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.
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.
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 $334,000. Additional costs of $10,000 for delivery and $59,000 for installation were incurred.
On August 30, 2018, Cord purchased a new automobile for $13,400.
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.
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
Prepare a schedule analyzing the changes in each of the plant asset accounts during 2018. Do not analyze changes in accumulated depreciation and amortization.
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For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2018. (Do not round intermediate calculations. Round your final answers to nearest whole dollar.)
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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 | ||
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 | 3/4 | $ 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 |