Homework SourseAt December 31 2015 Cord Companys plant asset and accumulate
At December 31, 2015, Cord Company\'s plant asset and accumulated depreciation and amortization accounts had balances as follows:
Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2016 and other information:
On January 6, 2016, a plant facility consisting of land and building was acquired from King Corp. in exchange for 27,000 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 $154,000 and $616,000, respectively.
On March 25, 2016, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $204,000. These expenditures had an estimated useful life of 12 years.
The leasehold improvements were completed on December 31, 2012, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2018, was renewable for an additional four-year term. On April 29, 2016, Cord exercised the renewal option.
On July 1, 2016, machinery and equipment were purchased at a total invoice cost of $327,000. Additional costs of $12,000 for delivery and $52,000 for installation were incurred.
On September 30, 2016, a truck with a cost of $24,200 and a book value of $9,400 on date of sale was sold for $11,700. Depreciation for the nine months ended September 30, 2016, was $2,115.
On December 20, 2016, a machine with a cost of $18,000 and a book value of $3,025 at date of disposition was scrapped without cash recovery.
Prepare a schedule analyzing the changes in each of the plant asset accounts during 2016. Do not analyze changes in accumulated depreciation and amortization.
The balance numbers are wrong below but I could not get anything else to paste in.
2. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2016. (Do not round intermediate calculations.)
| At December 31, 2015, Cord Company\'s plant asset and accumulated depreciation and amortization accounts had balances as follows: |
Solution
1.
CORD COMPANY
Analysis of Change in Plant Assets
Balance on 12/31/15
Increase
Decrease
Balance on 12/31/16
Land
179000
216000
0
395000
Land and Improvements
0
204000
0
204000
Buildings
1700000
864000
0
2564000
Machinery and Equipment
1325000
391000
-18000
1698000
Automobiles and Trucks
176000
12700
-24200
164500
Leasehold and Improvement
224000
0
0
224000
3604000
1687700
-42200
5249500
NOTE: Total consideration paid for plant facility = number of shares * fair value of shares
= 27000 * 40 = 1,080,000
The value will be divided into land and building in the ratio assessed value for taxes i.e. 154:616. Like for land = 1080000 * 154/770 = $216,000
2.
a) Land Improvement: Straight Line Method
Value = 204,000
Life = 12 years
Depreciation in 2016 = 9 months (April to December)
= (204000/12) * 9/12 = $12750
b) Buildings: 150% declining balance
Rate of Depreciation = (1/25)*150 = 6%
On beginning value for entire year = (1,600,000 – 330,900) * 6% = 76,140
On Addition for also for entire year = 864,000 * 6% = 51,840
Total = $ 127,986
c) Machinery and Equipment: Straight Line
On beginning value including part sold** = 1,225,000/10 = 122,500
On addition for 6 months = (391,000/10)*6/12 = 19,550
Total = 142,050
** As the part is sold on December 20, therefore on sold part depreciation would also be charged for full year.
d) Automobiles and Trucks: 150% Declining balance
Rate of depreciation = (1/5) * 150 = 30%
On Value excluding truck sold for entire year:
Beginning value = (174,000 – 102,325) = 71,675
Less: Value of Truck Sold in begging (24200 – (14800 – 2115)= 11,515
On value excluding truck sol = (71,675 – 11,515) * 30% = 18048
On Truck sold (given in ques.) = 2115
On Addition for 4 months = 12700 * 30% * 4/12 = 1270
Total = 21,433
e) Leasehold Improvement: Straight Line
Value in beginning = (220000 – 110000) / 5 = 22,000
CORD COMPANY
Depreciation and Amortization Schedule for 2016
Land Improvements
12750
Buildings
127986
Machinery and Equipment
142050
Automobiles and Trucks
21433
Leasehold and Improvements
22000
Total Depreciation and Amortization for 2016
326219
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| CORD COMPANY | ||||
| Analysis of Change in Plant Assets | ||||
| Balance on 12/31/15 | Increase | Decrease | Balance on 12/31/16 | |
| Land | 179000 | 216000 | 0 | 395000 |
| Land and Improvements | 0 | 204000 | 0 | 204000 |
| Buildings | 1700000 | 864000 | 0 | 2564000 |
| Machinery and Equipment | 1325000 | 391000 | -18000 | 1698000 |
| Automobiles and Trucks | 176000 | 12700 | -24200 | 164500 |
| Leasehold and Improvement | 224000 | 0 | 0 | 224000 |
| 3604000 | 1687700 | -42200 | 5249500 |
