Question

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At December 31, 2020, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows: Accumulated Depreciation and Amortization Category Land Buildings Equipment Automobiles and trucks Leasehold improvements Land improvements Plant Asset $ 168,000 1,150,000 775,000 165,000 202,000 321,900 310,500 93,325 101,000 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: a. On January 6, 2021, a plant facility consisting of land and building was acquired from King Corp. in exchange for 18,000 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 $136,000 and $544,000, respectively. b. On March 25, 2021, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $150,000. These expenditures had an estimated useful life of 12 years. C. 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. d. On July 1, 2021, equipment was purchased at a total invoice cost of $318,000. Additional costs of $12,000 for delivery and $43,000 for installation were incurred. e. On September 30, 2021, Cord purchased a new automobile for $11,800. f. On September 30, 2021, a truck with a cost of $23,300 and a book value of $7,800 on date of sale was sold for $10,800. Depreciation for the nine months ended September 30, 2021, was $1,755. g. On December 20, 2021, equipment with a cost of $13,500 and a book value of $2,800 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. 2. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2021.

Answer 1

Dear Student,

Kindly make the correction in the amount of automobiles and trucks depreciation

Part 1

CORD COMPANY

Analysis of Changes in Plant Assets

For the Year Ending December 31, 2021

	Balance 12/31/20	increase	decrease	Balance 12/31/21
Land	168000	144000		312000
Land improvements		150000		150000
Buildings	1150000	576000		1726000
Machinery and equipment	775000	373000	13500	1134500
Automobiles and trucks	165000	11800	23300	153500
Leashold improvements	202000			202000
	2460000	1254800	36800	3678000

NOTES:

Plant facility acquired from King 1/6/21—allocation to Land and Building:

                Fair value—18,000 shares of Cord common stock at $40 per share fair value = 720000

Allocation in proportion to appraised values at date of exchange:

	Amount	% of Total
Land	136000	20% (136000/680000)
Building	544000	80% (544000/680000)
	680000

Land = 720000*20% = 144000

Building = 720000*80% = 576000

Machinery and equipment purchased 7/1/18:

Invoice cost	318000
Delivery cost	12000
Installation cost	43000
Total acquisition cost	373000

Part 2

CORD COMPANY

Depreciation and Amortization Expense

For the Year Ended December 31, 2021

Land Improvements:

Cost	150000
Straight-line rate (1 ÷ 12 years)	x 8 1/3%
Annual depreciation	12500
Depreciation on land improvements for 2021:
(3/25 to 12/31/18)	x ¾	9375

Buildings:

Book value, 1/1/21 ($1150000-321900)	828100
Building acquired 1/6/21	576000
Total amount subject to depreciation	1404100
150% declining balance rate: (1 ÷ 25 years = 4% x 1.5)	X 6%	84246

Machinery and equipment:

Balance, 1/1/21	775000
Straight-line rate (1 ÷ 10 years)	X 10%	77500
Purchased on 7/1/21	373000
Depreciation for one-half year	X 5%	18650
Depreciation on machinery and equipment for 2021		96150

Automobiles and trucks:

Book value, 1/1/21 ($165000-93325)	71675
Deduct 1/1/21 book value of truck sold on 9/30 ($7800 + 1755)	(9555)
Amount subject to depreciation	62120
200% declining balance rate: (1 ÷ 5 years = 20% x 2)	X 40%	24848
Automobile purchased 9/30/21	11800
Depreciation for 2018 (40% x 3/12)	X 10%	1180
Truck sold on 9/30/21 – depreciation (given)		1755
Depreciation on automobiles and trucks		27783

Leasehold improvements:

Book value, 1/1/21 ($202,000 - 101,000)	101000
Amortization period (1/1/21 to 12/31/25)	5
Amortization of leasehold improvements for 2021	20200