Question

At December 31, 2017, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows: Accumulated Depreciation and Amortization Category Land Buildings Machinery and equipment Automobiles and trucks Leasehold improvements Land improvements Plant Asset $ 176,000 1,550,000 1,175,000 173,000 218,000 329,900 318,500 101,325 109,000 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: a. On January 6, 2018, a plant facility consisting of land and building was acquired from King Corp. in exchange for 26,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $60 a share. Current assessed values of land and building for property tax purposes are $228,000 and $532,000, respectively b. On March 25, 2018, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $198,000. These expenditures had an estimated useful life of 12 years. c. 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. d. On July 1, 2018, machinery and equipment were purchased at a total invoice cost of $326,000. Additional costs of $11,000 for delivery and $51,000 for installation were incurred. e. On August 30, 2018, Cord purchased a new automobile for $12,600.

Answer 1

Required 1 Decrease Land (W.N1) Land Improvements Buildings (W.N 1) Machinery and Equipment (W.N 2) Automobilies and trucks Leasehold improvements CORD COMPANY Analysis of Changes in Plant Assets For the year Ended December 31, 2018 Balance 12/31/2017 Increase $ 176,000 468,000 198,000 1,550,000 1,092,000 1,175,000 388,000 173,000 12,600 218,000 3,292,000 $ 2,158,600 Balance 12/31/2018 644,000 198,000 2,642,000 1,545,500 161,500 218,000 $ 5,409,000 17,500 24,100 Total $ 41,600

Working Notes 1. Allocation to land and Buildings of plant facility acquired from King Corp. Value of shares issued for land and Buildings (26,000 x 60) 1,560,000 Allocation in proporation to appraised values at the date of exchange Assets Amount % of total Land $ 228,000 30% (228,000/760,000) Building 532,000 70% (532,000/760,000) Total $ 760,000 Value of land and Building acquired from King Corp. Total Value of acquisition Land (1,560,000 x 30%) Building (1,560,000 x 70%) $ $ $ 1,560,000 468,000 1,092,000 $ 2. Cost of Machinery and equipment acquired Total Invoice cost Add: Delivery charges Add: Installation charges Total cost of machinery and equipment acquired 326,000 11,000 51,000 388,000 $

Required 2 CORD COMPANY Depreciation and Amortization Expense For the year Ended December 31, 2018 Land Improvements (W.N3) Buildings (W.N 4) Machinery and equipment (W.N5) Automobiles and trucks (W.N6) Leaseholde improvements (W.N 7) Total Depreciation and Amortization Expense for 2018 12,375 138,726 136,900 21,452 21,800 331,253 Working Notes 3. Calculation of Depreciation on Land Improvements Cost of land improvement as on 03/25/2018 Estimated life Method of depreciation Depreciation on land improvement per year (198,000/12) Depreciation on land improvement during the year 2018 i.e. (1/4/2018 - 12/31/2018) for 9 months (16,500 x 9/12) 198,000 12 years Straight line method 16,500 . 12,375 1,550,000 -329,900 4. Depreciation on Buildings A.Cost of Building as on 12/31/2017 B. Accumulated Depreciation as on 12/31/2017 C. Book Value of Buildings as on 12/31/2017 (A-B) Add: Purchase Cost of equipment (01/06/2018) Net book value of buildings (C+D) life (in years) Depreciation method (Declining Method) Depreciation (2,312, 100/25) > 150% 1,220,100 1,092,000 2,312,100 25 150% 138,726

1,175,000 388,000 10 5. Depreciation on Machinery and Equipment A. Cost of Machinery and equipment as on 12/31/2017 B. Cost of Machinery and equipment acquired on 7/1/2018 C. Estimated useful life (in years) D. Depreciation Method E. Depreciation Expenses Old Machinery and equipment for full year (1,175,000 / 10) Machinery and equipment purchased on 07/01/2018 i.e. for 6 months (388,000/10 x 6/12) Total Depreciation on Machinery and equipment Straight line method 117,500 19,400 136,900 6. Depreciation on Automobiles and trucks Cost of Automobiles and truck as on 12/31/2017 173,000 Less: Accumulated Depreciation as on 12/31/2017 -101,325 Book Value as on 12/31/2017 71,675 Less: Book value as on 12/31/2017 of Truck sold on 09/30/2017 (9,200 + 2,070)) -11,270 Net Book value of automobiles and truck subject to depreciation 60,405 Automobiles acquired 08/30/2018 12,600 Estimated life (in years) 5 Depreciation method (declining balance method) 150% Calculation of depreciation on Automobile and trucks On Old Automoblie and trucks {(60,405 x 150%)/5} 18,122 On New Truck from (Sept - Dec '18) for 4 months {(12,600 x 150%)/5} x 4/12 1,260 Depreciation on truck sold (given) 2,070 Total Depreciation 21,452 Note: Book value of truck sold at the beginning of year (Book value on the date of sale+Depreciation during the year)

7. Depreciation on leasehold improvements Cost of Leasehold improvements as on 12/31/2017 Less: Accumulated Depreciation as on 12/31/2017 Book Value as on 12/31/2017 Amortization period (1/1/2018 to 12/31/2022) (in years) Amortization for leasehold improvements (1,09,000/5) Note: Amortization period is 5 years i.e. renew in 2018 for 4 more years. 218,000 -109,000 109,000 21,800