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	$	170,000			$	—
Buildings		1,250,000				323,900
Machinery and equipment		875,000				312,500
Automobiles and trucks		167,000				95,325
Leasehold improvements		206,000				103,000
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 20,000 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 $175,000 and $525,000, respectively.

On March 25, 2018, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $162,000. 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 $320,000. Additional costs of $10,000 for delivery and $45,000 for installation were incurred.

On August 30, 2018, Cord purchased a new automobile for $12,000.

On September 30, 2018, a truck with a cost of $23,500 and a book value of $8,200 on date of sale was sold for $11,000. Depreciation for the nine months ended September 30, 2018, was $1,845.

On December 20, 2018, a machine with a cost of $14,500 and a book value of $2,850 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

Change of Fixed Assets during the year ended on 31.12.2018
Particulars	Opening Balance (excluding accumulated depreciation)	Additions	Sale of Fixed Assets	Month of Additions	Month of Deletion	Depreciation Method	Useful life	Depreciation for the year	Depreciation Calculation	Closing Balance
Land	170000	175000		Jan		-				345000
Buildings	926100	525000		Jan		150% decling method	25 years	87066	(926100+52500)*6%	1364034
Machinery & equipment	562500	375000	2850	July	Dec	straight line method	10 years	106250	875000/10+375000/10*6/12	834100
Automobiles & Trucks	71675	12000	8200	Sept	Sept	150% decling method	5 years	23288	{(71675-8200)+(12000*8/12)}*30%+1845	68588
Leasehold Improvement	103000					straight line method (5 years)	5 years	24524	11444+13079 (see note)	78476
Land Improvements	0	162000		April		straight line method	12 years	10125	162000/10*9/12	151875
Note
Leasehold Improvements
Remaining useful life as on May 2018		4 years 8 months
Book Value on Jan 2018		103000
Depreciation for Jan to April		11444
Book Value on May 2018		91556				e
revised Depreciation as per SLM for May to Dec		13079
Closing Balance		78476
(Since improvements completed on dec 2014 and the depriciation provided till dec 2017
is exactly half of the cost, the useful life is 6 years, which revised to 8 years as on 30th April 2018
due to exercise of renewal option)
150% Declining Balance method
1. 150%/useful life
2. multiply outcome of 1 with balance
Amortization Expenses
No. of share alloted		20000
Fair Value of each share		50
Total consideration paid		1000000
Land Fair Value		175000
Building Fair Value		525000
Excess over Fair value of assets		300000
Excess relating to land to be amortized only of sale of land		75000
Excess relating to Building to be amortized over useful life		225000
(150% decling Balance method)
Amortization expenses for current year		13500	(225000*150%/25years)