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	$	180,000			$	—
Buildings		1,750,000				333,900
Machinery and equipment		1,375,000				322,500
Automobiles and trucks		177,000				105,325
Leasehold improvements		226,000				113,000
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 30,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $40 a share. Current assessed values of land and building for property tax purposes are $160,000 and $640,000, respectively.

On March 25, 2018, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $222,000. 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 $330,000. Additional costs of $12,000 for delivery and $55,000 for installation were incurred.

On August 30, 2018, Cord purchased a new automobile for $13,000.

On September 30, 2018, a truck with a cost of $24,500 and a book value of $10,000 on date of sale was sold for $12,000. Depreciation for the nine months ended September 30, 2018, was $2,250.

On December 20, 2018, a machine with a cost of $19,500 and a book value of $3,100 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

(1)

	Balance 12/31/17	Increase	Decrease	Balance 12/31/18
Land	180000	240000*	0	420000
Land Improvement	-	222000	0	222000
Buildings	1750000	960000*	0	2710000
Machinery & Equipment	1375000	397000**	19500	1752500
Automobile & Trucks	177000	13000	24500	165500
Leasehold Improvements	226000	0	0	226000
	3708000	1832000	44000	5496000

* Land & Building Acquired against shares = 30000 shares * $40 = $1200000

   Land Fair value = 1200000/800000 * 160000 = $240000

   Building Fair Value = 1200000/800000 * 640000 = $960000

** Machinery & Equipment = $330000 + $12000 + $55000 = $397000

(2)

Land Improvements   (222000/12 years)	18500
Buildings   (2710000 X 6%*)	162600
Machinery & Equipment (1752500/10 years)	175250
Automobiles & Trucks (165500 * 30%**)	49650
Leasehold Improvements (226000/8 years)	28250
Total Depreciation & Ammortisation Exp for 2018	434250

* Depreciation Rate on Buildings = [(1/25 years ) * 100] * 150% = 6%

**Dep Rate on Automobiles & Trucks = [(1/5 years) * 100] * 150% = 30%